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Aberdeen New Thai IT (ANW)

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Monday 29 April, 2019

Aberdeen New Thai IT

Annual Financial Report

RNS Number : 3071X
Aberdeen New Thai Inv Trust PLC
29 April 2019
 

ABERDEEN NEW THAI INVESTMENT TRUST PLC

 

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 28 FEBRUARY 2019

 

STRATEGIC REPORT

 

Financial Highlights

 

Ordinary share price total return{A}         

-3.7%


Net asset value per Ordinary share total return{A}  

-5.1%






2018

+18.4%


2018

+17.7%

 

Stock Exchange of Thailand Index total return

 

-3.9%


 

Earnings per Ordinary share (revenue)

 

18.50p






2018

+21.6%

 


2018

11.12p

Total dividend per Ordinary share  

18.00p









2018

11.10p









{A}Alternative Performance Measure.


 

 

Overview

Launched in 1989, Aberdeen New Thai Investment Trust PLC (the "Company") is an investment trust, with its Ordinary shares listed on the premium segment of the London Stock Exchange, which aims to provide shareholders with a high level of long-term, above average capital growth through investment in Thailand.

 

The Company is governed by a board of directors, all of whom are independent, and has no employees. Like most other investment companies, it outsources its investment management and other administration to third party providers. The Company has appointed Aberdeen Fund Managers Limited ("AFML", the "Manager", or "AIFM") as its alternative investment fund manager, which has in turn delegated certain responsibilities, including investment management, to Aberdeen Asset Management Asia Limited ("AAMAL" or the "Investment Manager"). AFML and AAMAL are subsidiaries of Standard Life Aberdeen plc.

 

The Company does not have a fixed life but there is a discount monitoring period which operates annually during the last 12 weeks of the Company's financial year. In the 12 weeks ending 28 February 2019, the Ordinary shares traded at an average discount of 13.6% to the underlying net asset value per share (including income), therefore no special resolution to wind up the Company will be put to shareholders at the forthcoming AGM.

 

Financial Calendar

 

30 May 2019

Ex-dividend date for proposed Final Ordinary dividend

31 May 2019

Record date for proposed Final Ordinary dividend

25 June 2019

Annual General Meeting at 11.30am at Bow Bells House, 1 Bread Street, London EC4M 9HH

28 June 2019

Payment date for proposed Final Ordinary dividend of 11.0p per share

October 2019

Announcement of results for the six months ending 31 August 2019

31 October 2019

Ex-dividend date for Interim Ordinary dividend

1 November 2019

Record date for Interim Ordinary dividend

28 November 2019

Expected payment date for Interim Ordinary dividend

April 2020

Announcement of results for year ending 28 February 2020

 

 

CHAIRMAN'S STATEMENT

Introduction

It is my pleasure to write to you in my 6th year as Chairman of Aberdeen New Thai Investment Trust PLC and in the 30th year since the Company's launch.

 

The Company continues to pursue its investment objective of seeking to provide shareholders with a high level of long term, above average capital growth through investment in Thai companies, accepting that our Investment Manager's investment process may often lead to divergence from the Stock Exchange of Thailand Index ("SET Index"). The companies which make up the investment portfolio are considered by the Investment Manager, and the Board, to demonstrate quality as well as resilience in the context of the complicated Thai political situation. In addition, we continue to see our holdings offering opportunities for investors to benefit from the development of the broader Thai economy and the growing exposure to other regional markets that offer exciting opportunities such as Cambodia, Myanmar and Vietnam.

 

Long term performance continues to be the yardstick by which the Board measures the Investment Manager's performance. Accordingly, it is particularly pleasing to report that in the twentieth anniversary year of the launch of Individual Savings Accounts ("ISAs") in the UK, the Association of Investment Companies ("AIC") has identified your Company, for the second year running, as one that "if an investor had invested each year's maximum ISA limit from 1999 to 2018 - an investment of £206,560 in total - [your Company] would have turned it into a staggering £1,070,583" (AIC, 25 February 2019).

 

During the year, the net asset value ("NAV") per Ordinary share of your Company's portfolio fell by 5.1% on a total return basis, compared to the benchmark SET Index fall of 3.9%. The Ordinary share price fell by 3.7%, in total return terms, while the discount to NAV narrowed from 14.8% to 13.9%. The Thai Baht strengthened by 3.4% against broad Sterling weakness, given ongoing Brexit-related concerns. Further information on performance may be found in the Manager's Report.

 

Although the past has been volatile at times for Thai equities, I am pleased to report that overall your Company continues to achieve solid long term results with the NAV returning, on an absolute basis, 68.7% and 457.1% over 5 years and 10 years, respectively. Rising global risks and heightened market volatility recently have led to more indiscriminate capital flows in and out of the market than previously.

 

Your Board continues to monitor and review the impact of the initiatives introduced last year to improve the investment performance, which are being implemented into the portfolio, as appropriate. These included the Company's increased exposure to smaller capitalisation ("Small Cap") companies within the portfolio, the ability to invest in a limited number of unquoted Thai equities, the reallocation of a proportion of operating costs to capital, the introduction of an interim dividend and the potential to utilise more gearing. We expect to be able to observe the impact of these changes over the coming year and more information is set out below.

 

Details of, and Background to, the Results

During the year under review, Thai equities fell with the SET Index posting a total return of -3.9% in Sterling-adjusted terms. This came on the back of double-digit gains over the previous two financial years. The market's decline was largely in line with the broader Asian region, which was impacted by mounting trade friction between the world's two largest economies, the US and China. The threat of punitive tariffs from both sides took a toll on the world economy. In Asia, this could be seen in weakening exports towards the year end. The other key theme was monetary policy normalisation by the US Federal Reserve ("US Fed"), which spurred capital flows out of emerging markets. Despite healthy fundamentals, Thailand was not spared. As the year progressed, the US Fed switched to a more accommodative stance, driven partly by the deteriorating global environment. Markets were encouraged by this change of direction. Sentiment stabilised further when trade relations appeared to improve after Beijing and Washington returned to the negotiating table.

 

Investment Policy Changes announced in May 2018

At the AGM on 21 June 2018, shareholders approved a change to the Company's investment policy to permit investments in unquoted Thai equities provided that such investment was limited to 10%, in aggregate, of the Company's net assets at the time an investment is made.

 

Small Cap exposure

Our agreed investment parameters define Thai Small Cap stocks as those companies with a market capitalisation which is less than 50 billion Thai Baht ("THB"), currently equivalent to £1.2 billion. As at 28 February 2019 the proportion of the investment portfolio represented by Small Cap stocks had increased to 37.3%, from 35.2% at the previous year end, representing an overweight position to the SET index Small Cap weighting of 22.6% at the year end.

 

Gearing

During the year, the Company's £10 million loan facility with Scotiabank Ireland Limited was replaced with a competitively priced £15m loan facility with Industrial and Commercial Bank of China Limited, London Branch. The Company's drawn down loan was £5.65m at 28 February 2019 (2018 -  £5.65m). As explained in the Investment Manager's Report, with valuations looking less expensive, as and when opportunities arise it is expected that gearing will increase within the overall limits set by the Board.

 

Earnings, Dividend and Ongoing Charges

As announced in last year's Annual Report, the Board introduced an interim dividend in November 2018 in order to accelerate the distribution of earnings to shareholders, much of which are received by the Company in the first half of the financial year. A first interim dividend of 7.0p per share was declared payable on 23 November 2018 to shareholders on the register as at 26 October 2018 with an ex-dividend date of 25 October 2018.

 

In total the revenue earnings per Ordinary share were 18.5p for the year ended 28 February 2019 (2018 - 11.1p). This increase partly reflects the Board's decision, announced in May 2018, to charge 75% of investment management fees and bank loan interest to capital with effect from 1 March 2018, better reflecting total return expectations. Previously, 100% of these costs were charged to income.

 

This year the Board is proposing to shareholders a final dividend per Ordinary share of 11.0p. When taken together with the newly introduced interim dividend paid in November 2018 of 7.0p (2018 - nil), the total dividends per share for the year amount to 18.0p (2018 - final dividend paid only of 11.1p). Paying out the majority of the Company's earnings in keeping with its dividend policy together with the previously communicated move to charge a higher proportion of investment management fees and loan interest to capital means this represents an increase of 62.2% on last year. The total dividend for the year of 18.0p represents a yield of 3.3% using the 28 February 2019 share price of 552.0p. If approved at the Annual General Meeting ("AGM") on 25 June 2019, the final dividend will be paid on 28 June 2019 to shareholders on the register as at 31 May 2019. The ex-dividend date will be 30 May 2019.

 

It is pleasing to note also the fall in ongoing charges from 1.35% to 1.26% over the year and the Board continues to monitor operating costs closely. The reduced charge reflects, in part, the lower management fee agreed with the Manager with effect from 1 March 2018. From that date the Manager is entitled to a management fee payable monthly in arrears based on an annual amount of 0.9% (previously 1.0%) of the Company's assets less liabilities.

 

Overview

After a robust 2018, the ripple effects from the China-US tensions are starting to take effect. Anecdotal evidence suggests that residential property sales in Thailand are tapering off because of the weakening purchasing power of Chinese buyers who make up the largest share of foreign buyers in the condominium segment. Thai exports are also sliding, given that 10% of overseas shipments go directly to China and a similar amount to the US. A 6% fall in overseas sales dragged the trade balance into an unexpected deficit of US$4 billion in January 2019, a worrying development. With China's GDP growth moderating to its slowest pace in nearly 30 years and US economic activity also showing signs of cooling, it should not come as a surprise if exports were to fall further.

 

On the other hand, demand in Thailand remains buoyant. Indeed, it was healthy domestic consumption that powered the economy in 2018. A combination of rising employment and growth in personal loans allowed demand for both non-durable and durable goods, such as automobiles, to rise at a decent pace. This, along with a sturdy current account surplus and ample foreign exchange reserves, aided the Thai Baht's outperformance against other emerging market currencies over the reporting period, even if the local currency did weaken marginally against the US dollar. With inflationary pressures remaining benign, domestic demand may improve further, although elevated household debt remains an issue.

 

The Baht's relative outperformance could also be attributed to the Bank of Thailand's ("BOT's") December rate hike, its first in over three years. With the Fed raising policy rates three times, the US dollar strengthening and outflows from emerging markets accelerating over the reporting period, the BOT was keen to curb financial risks and protect its currency. Arguably, the BOT need not have been concerned as the Baht proved resilient even before the rate hike, underpinned by solid domestic fundamentals.

 

Domestically, politics took a backseat to external challenges for much of the reporting period. Nevertheless, markets were jolted in February 2019 by the sudden nomination and then disqualification of King Vajiralongkorn's sister as a prime ministerial candidate in the March election. The opposition party backed by populist ex-premier Thaksin Shinawatra that nominated the princess was subsequently dissolved by the Constitutional Court. Despite this disruptive turn of events, it is heartening to note that, at the time of writing, Thailand held its first election since 2011, presaging an end to military rule. Final results are expected in early May following the coronation celebrations for King Vajiralongkorn.

 

Board

The Board is conscious of the need for continual refreshment of its membership and initiated the recruitment of a new Director during the year, with assistance from an independent search consultancy. As a consequence the Board was delighted to announce the appointment of Sarah McCarthy as a Director on 1 March 2019. Sarah brings to the Board over twenty years' experience in financial services, fifteen years of which have been focused on investment marketing. She has a wealth of communications and marketing campaign knowledge gained across a wide range of investment products and client types. Sarah will seek formal election as a Director at the AGM and I encourage shareholders to vote in favour of her appointment.

 

Our Senior Independent Director ("SID"), Clare Dobie, is not standing for re-election as a Director at the AGM and will retire at its conclusion. I, and the other Directors, would like to recognise Clare's considerable contribution to the Board, and to the Company, across many areas but not least through her championing of clearer communications with our shareholders and planholders. We thank her and wish her well. Clare will be succeeded as SID by Andy Pomfret.

 

Discount and share buybacks

The Board continues to actively monitor the discount of the Ordinary share price to the NAV per Ordinary share (including income) and will continue to pursue a policy of selective buybacks of shares where to do so would be in the best interests of shareholders whilst also having regard to the overall size of the Company. In pursuit of this objective, during the year ended 28 February 2019 the Company bought back and cancelled 280,612 Ordinary shares (2018 - 1,665,119 Ordinary shares) at a cost of £1.6m (2018 - £9.0m), representing 1.7% (2018 - 9.0%) of the Company's issued share capital at the start of the year.

 

Duration

The Company does not have a fixed life. However, under the Articles of Association, if in the 12 weeks preceding the Company's financial year end (28 February) the Ordinary shares have been trading, on average, at a discount in excess of 15% to the underlying NAV (calculated including undistributed net revenue) over the same period, notice will be given of a special resolution to be proposed at the following AGM that the Company be put into voluntary liquidation. Over the 12 weeks ended 28 February 2019, the relevant figure was 13.6% and, accordingly, no special resolution to wind up the Company will be put to the AGM.

 

Promotional Activities

Your Board continues to promote the Company through the Investment Manager's promotional activities and the Company contributed £63,000 (excluding VAT) during the year ended 28 February 2019 (2018 - £66,000). The Board reviews regularly these promotional activities.

 

Electronic communications

The Board is proposing to take advantage of the ability, under the Company's Articles of Association, to communicate electronically with shareholders as well as making documents available on its website instead of sending out paper versions. Increased use of electronic communications will deliver savings to the Company in terms of administration, printing and postage costs, as well as accelerating the provision of information to shareholders. The reduced use of paper will also bring environmental benefits. The Company will therefore be writing to you later in the year seeking your consent to communicate with you electronically noting that shareholders are provided with regular opportunities to request a paper version.

 

Outlook

The ongoing trade issues are likely to remain uppermost in investors' minds. With negotiators from China and the US scheduling a new round of high-level talks, tensions may ease. Given that economic growth has already been damaged, both sides want the deal to succeed. A more complex dispute over technological advancement may be harder to resolve. It is clear that the US is seeking to constrain China's growing influence in the technology sector, while the latter is unlikely to comply without a fight. Nevertheless, this clash seems relatively contained and does not appear to be detrimental to the broader macroeconomic environment. A more dovish stance from the Fed and the People's Bank of China should also help cushion any slowdown.

 

However, should a favourable outcome prove elusive, Thai exports, notably to China, may decelerate further. While this would prove disappointing, it is worth considering that the bulk of shipments go to near neighbours, such as Vietnam, Myanmar and Malaysia, and these remain intact. Domestic demand could also take up the slack. Private consumption makes up 50% of GDP. Tourism is still expected to be robust and contribute significantly to growth, given the positive spillover effects on the services sector, including financial services. Credit demand from both consumers and businesses remains firm.

 

The development of the Eastern Economic Corridor, the government initiative to enhance Thailand's eastern seaboard, a crucial manufacturing base, continues to gain traction. This area attracts the most foreign direct investments. To connect industries, a further expansion of road and rail networks is needed, so spending on construction and infrastructure should increase, giving additional impetus to private investments.

 

The smooth delivery of government initiatives will depend on a domestic environment that guarantees policy continuity following the conclusion of the election process. The new government will be keen to maintain the solid growth momentum that the military junta had engineered and not to dismantle policies that have been put in place. This should reassure investors.

 

I am encouraged by Thailand's longer-term prospects, which remain undiminished. Corporate fundamentals are also sound, notably those of your Company's portfolio. The Small Cap holdings, in particular, have great potential to grow in tandem with rising domestic wealth and consumption, coupled with expansion into nearby developing markets. The Investment Manager's Report highlights several of these smaller holdings that have done well. With the recent correction, valuations now appear reasonable and our Investment Manager continues to search for gems to add to the portfolio.

 

AGM

The AGM, which will be held at Bow Bells House, 1 Bread Street, London EC4M 9HH from 11.30am on 25 June 2019, provides shareholders with an annual opportunity to meet the Board and to ask any questions that they may have of either the non-executive directors or the Investment Manager.

 

The Board is happy to take general questions on the Annual Report and financial statements at the meeting but would request that questions of a technical nature should be advised to the Company Secretaries by email or by post, in advance.

 

I look forward to meeting as many shareholders as possible at the AGM which will be followed by a buffet lunch.

 

Action to be Taken

Shareholders will find enclosed with this Annual Report a Form of Proxy for use in relation to the AGM. Whether or not you propose to attend the AGM, you are encouraged to complete the Form of Proxy in accordance with the instructions printed on it. Please return it in the prepaid envelope as soon as possible but in any event so that it might be received no later than 11.30am on 21 June 2019. Completion of a Form of Proxy does not prevent you from attending and voting in person at the AGM if you wish to do so.

 

If you hold your shares in the Company via a share plan or a platform and would like to attend and/or vote at the AGM, then you will need to make arrangements with the administrator of your share plan or platform. For this purpose, investors that hold their shares in the Company via the Aberdeen Standard Investments Children's Plan, Share Plan and/or ISA will find a Letter of Direction enclosed. Shareholders are encouraged to complete and return the Letter of Direction in accordance with the instructions printed thereon.

 

For holders of shares via share plans and platforms, the website of the Association of Investment Companies (theaic.co.uk/aic/shareholder-voting-consumer-platforms) contains details of how to attend and vote at Company Meetings.

 

Nicholas Smith

Chairman

 

26 April 2019

 

 

OVERVIEW OF STRATEGY

Business Model

The business of the Company is that of an investment company which qualifies as an investment trust for UK capital gains tax purposes. The Directors do not envisage any change in this activity in the foreseeable future.

 

Investment Objective

The Company aims to provide shareholders with a high level of long term, above average capital growth through investment in Thailand.

 

Investment Policy

At the AGM held on 21 June 2018, shareholders approved changes to the Company's investment policy.

 

The Company's new investment policy is flexible enabling it to invest in a diversified portfolio of securities (substantially in the form of equities or equity-related securities such as convertible securities and warrants but which may also include debt securities) issued by companies, spread across a range of industries, which are either (i) quoted on the Stock Exchange of Thailand or (ii) that are unquoted and at, or near, initial public offering stage. There are no restrictions on which market segment or geographical region within Thailand that the Company may invest nor whether its investments are in small, mid or large capitalisation companies.

 

Details of the Company's investment policy prior to 21 June 2018 may be found on page 9 of the Company's Annual Report for the year ended 28 February 2018.

 

Risk Diversification

The Company's portfolio will comprise no less than 10 holdings and the Investment Manager will at all times have due regard to the spread of investment risk.

 

The Investment Manager is authorised to invest up to 10% of the Company's net assets in the securities of any single company although circumstances may occasionally arise when it may be in shareholders' interests to make an investment that exceeds this level.

 

The Investment Manager is authorised to invest in unquoted securities provided that such investment, in aggregate, is limited to 10% of the Company's net assets at the time any investment is made.

 

The Company complies with Section 1158 of the Corporation Tax Act 2010. The Company will not invest more than 10%, in aggregate, of the value of its gross assets in investment trusts or investment companies admitted to the Official List, provided that this restriction does not apply to investments in any such investment trusts or investment companies which themselves have stated investment policies to invest no more than 15% of their gross assets in other investment trusts or investment companies admitted to the Official List. In any event, the Company invests no more than 15% of its gross assets in other listed investment companies (including listed investment trusts).

 

In addition, the Company will not:

 

-     invest in physical commodities;

-     enter into derivative transactions for speculative purposes;

-     take legal or management control of any of its investee companies; or

-     conduct any significant trading activity.

 

Gearing

The Board is responsible for setting the gearing limits in place for the Company subject to a maximum level of 25% of net assets (measured when new borrowings are incurred). It is intended that this power should be used to leverage the Company's portfolio in order to enhance returns when and to the extent that it is considered appropriate to do so. Gearing will be tactical in nature and used in relation to specific opportunities or circumstances. The Directors will take care to ensure that borrowing covenants permit maximum flexibility of investment policy.

 

Benchmark

The Company's benchmark is the Stock Exchange of Thailand Index ("SET Index").

 

Key Performance Indicators ("KPIs")

The Board uses a number of financial performance measures to assess the Company's success in achieving its objective and to determine the progress of the Company in pursuing its investment policy.  The main KPIs identified by the Board in relation to the Company, which are considered at each Board meeting, are as follows:

 

KPI

Description

Capital and total return of the Net Asset Value ("NAV") relative to SET Index

 

The Board considers the Company's NAV capital and total return figures, relative to the SET Index, to be the best indicator of performance over time.  The figures for this financial year and for the past three and five years are set out in Performance.

 

Discount to NAV

The discount at which the Company's share price trades relative to the NAV (including income) per share is closely monitored by the Board.

Ongoing charges

The Board regularly monitors the Company's operating costs and their composition with a view to assessing value for money. Ongoing charges for this year and the previous year are disclosed in Results.

 

 

Principal Risks and Uncertainties

There are a number of risks which, if realised, could have a material adverse effect on the Company and its financial position, performance and prospects. The Board has carried out a robust assessment of these risks, which include those that would threaten its business model, future performance and solvency. The principal risks associated with an investment in the Company's shares are published monthly in the Company's factsheet or they can be found in the pre-investment disclosure document ("PIDD") published by the Manager, both of which are available from the Company's website: newthai-trust.co.uk.

 

The principal risks and uncertainties faced by the Company are reviewed annually by the Audit and Management Engagement Committee in the form of a detailed risk matrix and heat map and are summarised in the table below, together with any mitigating actions.

 

In addition to these risks, the outcome and potential impact on the Company of the UK Government's ongoing Brexit discussions with the European Union remain unclear at the time of writing. The Company's Thai investments are limited in their direct exposure to the UK market and even a no-deal Brexit would pose an immaterial risk. However, as the Company is priced in Sterling, sharp movements in the Thai Baht/Sterling exchange rate, which may arise from Brexit, could affect the Company's net asset value. Separately, investor sentiment might lead to increased or reduced demand for the Company's shares, in light of Brexit uncertainty, which would be reflected in a narrowing or widening of the discount at which the Company's shares trade relative to their net asset value. Overall, the Board does not expect the Company's business model, over the longer term, to be affected by Brexit. In all other respects, the Company's principal risks and uncertainties have not changed materially since the date of the Annual Report and are not expected to change materially for the current financial year. 

 

Description

Mitigating Action

Discount volatility - being the risk that the Company's share price may fluctuate and vary considerably from the underlying NAV of the Ordinary shares. External factors which may influence the discount include market conditions, general investor sentiment and the interaction of supply and demand for the Ordinary shares.

The Board has agreed with the Manager certain parameters within which the Manager may buy-back the Company's own shares bearing in mind that the Company's operating costs would be spread across a reduced number of shares. These parameters are reviewed on an ongoing basis. Any shares repurchased may be either cancelled or held in treasury.

Dividends - the Company will only pay a dividend on the Ordinary shares to the extent that it has profits or revenue reserves available for that purpose. The ability of the Company to pay a dividend, and any future dividend growth, will depend primarily on the level of income received from its investments. Accordingly, the amount of the dividends paid to Ordinary shareholders may fluctuate.

The Board monitors this risk by reviewing and challenging, at each meeting, short and longer-term income forecasts prepared by the Investment Manager covering portfolio investment yield as well as the expected operating costs of the Company. The Company benefits from revenue reserves which may be drawn upon to smooth dividends payable to shareholders where there is a shortfall in revenue returns.

Financial and regulatory - the financial risks associated with the portfolio could result in losses to the Company. In addition, failure to comply with relevant regulation (including the Companies Act, the Financial Services and Markets Act, the Alternative Investment Fund Managers Directive, accounting standards, investment trust regulations and the Listing Rules, Disclosure Guidance and Transparency Rules and Prospectus Rules) may have an adverse impact on the Company. 

 

Any change in the Company's tax status or in taxation legislation (including the tax treatment of dividends or other investment income received by the Company) could affect the value of the investments held by the Company and the Company's ability to provide returns to shareholders or alter the post-tax returns to shareholders.

 

The financial risks associated with the Company include market risk, liquidity risk and credit risk, all of which are mitigated by the Investment Manager. Further details of the steps taken to mitigate the financial risks associated with the portfolio are set out in note 15 to the financial statements. The Board is responsible for ensuring the Company's compliance with applicable regulations. Monitoring of this compliance, and regular reporting to the Board thereon, has been delegated to the Manager. The Board receives updates from the Manager and AIC briefings concerning industry changes. From time to time, the Company also employs external advisers covering specific areas of compliance.

Foreign exchange risks - the Company accounts for its activities and reports its results in Sterling while investments are made and realised in Thai Baht; bank borrowings are presently denominated in Sterling. It is not the Company's present intention to engage in currency hedging although it reserves the right to do so. Accordingly, the movement of exchange rates between Sterling, Thai Baht and other currencies in which the Company's borrowings may be drawn down from time to time may have a material effect, unfavourable as well as favourable, on the total return otherwise experienced on the investments made by the Company, including the level of investment income.

The Company's multi-currency bank facility permits borrowings to be drawn down in certain non-Sterling currencies if required. The Board monitors the Thai Baht/Sterling exchange rate at each meeting.

 

 

 

 

 

 

 

 

 

Gearing - whilst the use of gearing should enhance the total return on the Ordinary shares where the return on the Company's underlying assets is rising and exceeds the cost of borrowing, it will have the opposite effect where the underlying return is less than the cost of borrowing, further reducing the total return on the Ordinary shares. A fall in the value of the Company's investment portfolio could result in a breach of bank covenants and trigger demands for early repayment.

 

The Board is responsible for determining the gearing strategy for the Company, with day-to-day gearing decisions being made by the Investment Manager.

 

Borrowings are short term in nature and particular care is taken to ensure that any bank covenants permit maximum flexibility of investment policy. The Board has agreed certain gearing restrictions with the Manager and reviews compliance with these guidelines at each Board meeting. Loan agreements are entered into following review by the Company's lawyers.

Investment objective - the setting of an unattractive strategic proposition to the market and the failure to adapt to changes in investor demand may lead to the Company becoming unattractive to investors, a decreased demand for its shares and a widening discount.

The Board keeps the investment objective and policy under regular review. An annual strategy meeting is held by the Board including the review of reports from the Investment Manager's investor relations team and updates on the market from the Company's broker.

Liquidity risk - this is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. In addition, the Company, and/or its Investment Manager may accumulate investment positions which represent more than normal daily trading volumes which may make it difficult to realise investments quickly.

Liquidity risk is not considered to be significant as, whilst liquidity is limited in certain stocks which the Company holds, the majority of the Company's assets comprise readily realisable securities which can be sold to meet funding requirements if necessary. The Board reviews, at each meeting, the liquidity profile of the Company's investment portfolio.

 

Market risk - being the risk that the portfolio, managed by the Investment Manager, suffers a fall in its market value which would have an adverse effect on shareholders' funds. The Company's investments are subject to normal market fluctuations and the risks inherent in the purchase, holding or selling of equity securities and there can be no assurance that appreciation in the value of those investments will occur.

 

The Investment Manager's investment process concentrates on a company's business strategy, management, financial strength and ownership structure as well as corporate governance, with a view to seeking companies that it can invest in for the long term. This quality test means that there are stocks listed on the SET Index which the Investment Manager will not invest in due to a perceived lack of transparency or poor corporate governance.

The Investment Manager seeks to diversify market risk by investing in a wide variety of companies with strong balance sheets and the earnings power to pay increasing dividends. In addition, investments are made in diversified sectors in order to reduce the risk of a single large exposure; at present the Investment Manager may not invest more than 10% of the Company's net assets in any single stock. The Investment Manager is authorised to invest in unquoted securities provided that such investment, in aggregate, is limited to 10% of the Company's net assets at the time any investment is made.

 

The Investment Manager believes that diversification should be looked at in absolute terms rather than relative to the SET Index. The performance of the portfolio relative to the SET Index and the underlying stock weightings in the portfolio against their index weightings are monitored closely by the Board.

 

Operational - the Company has contracted with third parties for the provision of all systems and services (in particular, those of Aberdeen Standard Investments) and any control failures and gaps in these systems and services could result in a loss or damage to the Company.

The Board receives reports from the Manager throughout the year on internal controls and risk management and receives equivalent assurances from all its other significant service providers on at least an annual basis. This includes monitoring by the Manager, on behalf of the Board, of service providers' planning for business continuity and disaster recovery, together with their policies and procedures designed to address the risk posed to the Company's operations by cyber-crime. Further details of the internal controls which are in place are set out in the Audit and Management Engagement Committee's Report.

The depositary, BNP Paribas Securities Services, presents at least annually on the Company's compliance with AIFMD.

Political risk and exchange controls - in common with the majority of Asian stockmarkets, investments in Thailand are subject to a greater degree of political risk than that with which investors might be familiar.

 

In addition, investments purchased by the Company may be subject, in the future, to exchange controls or withholding taxes in the Thai jurisdiction. In the event that exchange controls or withholding taxes are imposed with respect to any of the Company's investments, the effect will generally be to reduce both the income received by the Company from its investments and/or the capital value of the affected investments.

 

Given the nature of the risks to which the Company's investments are subject, which are those inherently associated with a single-country fund, there are limited options available to the Board for mitigating these risks.  The Board believes that mitigation is best effected by careful selection of the constituents of the Company's portfolio with high-calibre, financially-sound companies, with good management and excellent growth potential.

 

Investment in Thai equities involves a greater degree of risk than that usually associated with investment in major securities markets. Through regular interaction with the Manager and other commentators, the Board stays up-to-date with the latest political and economic news in Thailand.

 

Promoting the Company

The Board recognises the importance of promoting the Company to prospective investors both for improving liquidity and enhancing the value and rating of the Company's shares. The Board believes an effective way to achieve this is through subscription to, and participation in, the promotional programme run by Aberdeen Standard Investments on behalf of a number of investment companies under its management. The Company's financial contribution to the programme is matched by Aberdeen Standard Investments. Representatives of Aberdeen Standard Investments report quarterly to the Board with analysis of the promotional activities as well as updates on the shareholder register and any changes in the composition of that register.

 

The purpose of the programme is both to communicate effectively with existing shareholders and to gain new shareholders with the aim of improving liquidity and enhancing the value and rating of the Company's shares. Communicating the long-term attractions of the Company is key and therefore the Company also supports Aberdeen Standard Investments investor relations programme which involves regional roadshows as well as promotional and public relations campaigns. 

 

Board Diversity Policy

The Board recognises the importance of having a range of skilled, experienced individuals with the right knowledge represented on the Board in order to allow the Board to fulfil its obligations. The Board also recognises the benefits, and is supportive, of the principle of diversity in its recruitment of new Board members however it does not consider appropriate the setting of diversity targets. As at 28 February 2019 there were two male Directors and two female Directors (2018: two male Directors and two female Directors). Subsequent to the year end, a further female Director was appointed a Director on 1 March 2019.

 

Environmental, Social and Human Rights Issues

The Company has no employees as the Board has delegated day to day management and administrative functions to ASFML. There are therefore no disclosures to be made in respect of employees. The Company's socially responsible investment policy is outlined below.

 

Due to the nature of the Company's business, being a company that does not offer goods and services to customers, the Board considers that it is not within the scope of the Modern Slavery Act 2015 because it has no turnover. The Company is therefore not required to make a slavery and human trafficking statement.

Notwithstanding this, the Board considers the Company's supply chains, dealing predominantly with professional advisers and service providers in the financial services industry, to be low risk in relation to this matter.

 

Socially Responsible Investment Policy

The Board acknowledges that there are risks associated with investment in companies which fail to conduct business in a socially responsible manner. The Board has noted the corporate stewardship and sustainability programme of Aberdeen Standard Investments, which can be found at -

standardlifeaberdeen.com/corporate-stewardship-and-sustainability

 

Global Greenhouse Gas Emissions

The Company has no greenhouse gas emissions to report from the operations of its business, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.

 

Viability Statement

The Company does not have a formal fixed period strategic plan but the Board does formally consider risks and strategy on at least an annual basis. The Board considers the Company, with no fixed life, to be a long term investment vehicle, but for the purposes of this viability statement has decided that a period of three years is an appropriate period over which to report. The Board considers that this period reflects a balance between looking out over a long term horizon and the inherent uncertainties of looking out further than three years.

 

Accordingly, taking into account the Company's current position and the potential impact of its principal risks and uncertainties, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for a period of three years from the date of this report. In making this assessment, the Board has considered that matters such as a large economic shock, a period of significant stock market volatility, a significant reduction in the liquidity of the portfolio or changes in regulations and investor sentiment, could have an impact on its assessment of the Company's prospects and viability in the future.

 

In particular the Board recognises that this assessment makes the assumption that the Company's average discount to the NAV per Ordinary share (including income) for the 12 weeks ended 28 February 2020 and 12 weeks ended 28 February 2021, individually, does not exceed 15% which negates the requirement to put to shareholders at the AGMs to be held in either 2020 or 2021, a special resolution to wind up the Company.

 

Future

Further details on the Directors' expectations regarding the future, may be found in the Chairman's Statement whilst the Investment Manager's views are included in its Report.

 

On behalf of the Board

 

Nicholas Smith

Chairman

 

26 April 2019

 

 

INVESTMENT MANAGER'S REPORT

Overview

Thai equities were volatile in the year under review. Stocks initially rose and fell in tandem with the trade rhetoric between the US and China. As the year progressed, emerging markets came under pressure following comments from a hawkish US Federal Reserve and an appreciating US dollar. However, the Thai market held up well, testament to the economy's robust fundamentals which included a healthy current account surplus and the Baht becoming one of the best performing emerging market currencies over the period. Royal approval of laws to usher in fresh elections in March 2019 also supported investor sentiment.

 

Over the year, the economy remained robust. Gross Domestic Product (GDP) expanded by 4.1% in 2018, its fastest pace in six years, underpinned by tourism and higher domestic demand. The former was affected temporarily in July by a tragic boating accident in Phuket involving Chinese holidaymakers. Nevertheless, tourist numbers have since recovered, buttressed by the government's move to waive visa fees for two months for certain countries. In macroeconomic policy, the central bank raised rates in December last year, its first hike in over three years. It sought to reduce risks to financial stability and provide a buffer for the next downturn.

 

Portfolio

For the year ended 28 February 2019, the Stock Exchange of Thailand index (the "Index") fell by 3.9% while your Company's net asset value decreased by 5.1%, both figures in Sterling total return terms.

 

The portfolio's underlying stocks in the resources sector delivered solid returns, which was especially pleasing given weakness in the broader sector. Electricity Generating (Egco), the second largest local private power supplier, was buoyed by steady earnings growth and expectations that it would harness its solid balance sheet for new investments. The company, for instance, acquired a 49% stake in a new South Korean power plant that would raise its operational capacity, at a reasonable cost of 900 billion won (US$794 million).

 

At the other end of the energy value chain, PTT Exploration & Production (PTTEP) rode a cyclical oil price uptrend and an appreciating Baht to record higher earnings. It also won auctions for two key offshore natural gas fields in Thailand. Though subsequent concerns over the profitability of these concessions erased some of its gains, we are more optimistic given their longer reserve life and higher sales volume. Meanwhile, shares of its parent, national oil and gas conglomerate PTT, also advanced after its inclusion in the portfolio in July. Sentiment toward the largest stock in the Index improved due to a more positive outlook for oil prices, and the group's lower burden in subsidising fuel prices in Thailand. The proposed listing of its retail arm was another positive catalyst.

 

Further bolstering the Company's performance was the choice of industrial stocks. In particular, Thai Stanley Electric, posted solid earnings growth amid an automotive car industry recovery that was supported by faster GDP expansion, exports and launches of new car models. The firm, which makes car lightbulbs as well as moulds for automobile parts, is a compelling investment due to its production efficiencies and potential for greater capacity as it builds new factories.

 

On the flipside, insurance stocks were a major drag on performance, due to heightened competition in the sector and company specific factors.  Thai Reinsurance's earnings were dampened by higher than expected claims in its public teachers' portfolio, and difficulties in generating underwriting profits elsewhere. We are monitoring its performance. Thaire Life Assurance was weighed down by heavier claims for its group health policies, while seeing lower margins in its new products. Notwithstanding the short term pressure, we still like the firm's prospects as the sole domestic life insurer in an underpenetrated sector. New players would face high barriers of entry due to strict regulations. Tougher competition hampered Muang Thai, with challenges in both its motor and non motor underwriting business pressuring its share price. The management is trying to phase out the unprofitable motor portfolio, and we remain confident in this reputable insurer which has always struck a sensible balance between profitability and market share.

 

Property and construction was another weak sector, following the government's move to tighten mortgage requirements for high end homes to curb speculation. Developers LPN and Sammakorn were hit as a result. Nevertheless, as buyers rushed to finalise their purchases ahead of the measures which take effect this April, the two companies could see a boost to their first quarter results. LPN was also hurt by market scepticism about the success of its diversification strategy, from low end condominium projects towards mid end apartments and landed housing. We are confident in the management's ability, given the developer's 30 year track record and its well known brand. The company is also marketing its project management services, a key strength that has enabled it to turn projects around quickly and achieve operational efficiencies. This forms another part of its new strategy that we believe has potential.

 

New Small and Mid Cap holdings

As in last year's report, we would like to shine the spotlight on two of our newer holdings. This time though it is on small and mid cap holdings following the approval by shareholders of the change to the investment mandate allowing us to increase the Company's exposure to growth companies through investment in companies close to IPO and listing.

 

The first of these is Osotspa, whose initial public offering we participated in as a cornerstone investor during the year under review. The century old consumer product conglomerate has a good portfolio of energy drinks and personal care products, ranging from baby soap to deodorants. First established in 1891 as a small pharmacy in downtown Bangkok selling traditional Chinese medicine for stomach pain, the group is better known today as the largest energy drinks distributor in the country. It carries flagship brands such as M-150 and Shark.

 

The family owned business brought in a new management team a few years ago as part of its transformation strategy. This team has years of professional experience under its belt, with many having cut their teeth at an international fast moving consumer goods conglomerate. The firm, which dominates the domestic energy drink market, is keen to defend its market share of over 50% and expand into other product categories where growth prospects are better.

 

In neighbouring countries such as Myanmar and Laos where rising incomes, improving infrastructure and first mover advantage present considerable growth potential, Osotspa has a good foothold; its M-150 product is a leading energy drink in these markets. The group has formed a joint venture with Burmese beverage manufacturer and distributor Loi Hein Co to tap their deep knowledge of the local market and customers. It is now building a manufacturing plant in Myanmar that will help the firm respond more quickly to market demand and manage its costs better. It also has plans to expand into Vietnam and China.

 

Another promising small cap holding worth highlighting is TOA Paint, the country's top paint producer. With a share of nearly half the market, the firm has pricing power in a sector that is likely to grow in line with, or even faster than, the country's economic development. TOA has about 200 brands in all, with the majority of it in decorative paint and coating products. However, it plans to raise its market share in the non decorative segment, which includes construction chemicals, heavy duty coatings, wood coatings, hardware and power tools, together with speciality paint. The firm has expanded into the region and, by the end of this year, will have 10 factories spread across Thailand, Cambodia, Vietnam, Laos, Malaysia, Indonesia and Myanmar.

 

Both these holdings are also among your portfolio's top contributors this past year, an endorsement by investors who believe in their growth prospects. Meanwhile, in other portfolio activity, we sold media company Prakit Holdings, broadcasting company BEC World and MFC Asset Management in favour of the new holdings mentioned earlier which we believe have better growth prospects.

 

Outlook

Among the many factors that could influence the Thai market in the current year are the elections held in March 2019, the country's first since 2011. At the time of writing, while the votes have been cast, the results are as yet unknown as the Election Commission has 60 days to release them. It is heartening for us to note that major candidates on both sides are pro business and recognise the importance of continued growth in the economy; the main differences are in personality rather than policy. The risk of possible political unrest remains. On the other hand, political stability following the elections would attract more foreign direct investments into the country.

 

Of course, external uncertainties exist.  It remains to be seen whether the US and China can reach a trade deal, and how successful China's stimulus measures will be at perking up its economy again. Domestically, there are signs that slowing external demand could affect growth in its export sector which contributes to about two-thirds of GDP.  High household debt is also likely to constrain private consumption.

 

On the corporate front though, share prices which have been dampened by political uncertainty in the run up to the elections have resulted in valuations appearing fairly cheap relative to historic levels, supported by what we expect to be low double digit earnings growth this year. Amid periods of uncertainty, your Company's quality holdings, which display durable competitive strengths and low debt levels, should stand out. At the same time, with many stocks now trading at attractive valuations, we continue to be on the lookout to acquire, possibly through an increased use of the ICBC loan facility, those with resilient earnings that could bolster future returns and add value for shareholders.

 

Aberdeen Standard Investments (Asia) Limited

Investment Manager

 

26 April 2019

 

 

PERFORMANCE

1 year return

3 year return

5 year return


%

%

%

Total return (capital return plus dividends reinvested)




Share price{A}

-3.7

+45.6

+74.9

Net asset value{A}

-5.1

+41.3

+68.7

SET Index

-3.9

+59.6

+90.8





Capital return




Share price

-6.8

+35.3

+56.0

Net asset value

-7.7

+32.8

+53.2

SET Index

-6.8

+45.2

+62.7

 

 

FINANCIAL HIGHLIGHTS

 


28 February 2019

28 February 2018

% change

Total assets (£'000)

112,021

122,818

-8.8

Equity shareholders' funds (net assets) (£'000)

106,371

117,168

-9.2

Market capitalisation (£'000)

91,538

99,832

-8.3

Ordinary share price (mid-market)

552.00p

592.00p

-6.8

Net asset value per Ordinary share

641.45p

694.80p

-7.7

Discount to net asset value per Ordinary share{A}

13.9%

14.8%


Stock Exchange of Thailand ("SET") Index (Sterling adjusted, capital return)

39.45

42.31

-6.8

Net gearing{A}

2.79%

2.89%






Dividends and earnings




Revenue return per share

18.50p

11.12p

+66.4

Proposed total dividends per share

18.00p

11.10p

+62.2

Dividend cover{A}

1.03

1.00


Revenue reserves (prior to payment of proposed final dividend) (£'000)

4,200

4,137






Operating costs




Ongoing charges ratio{A}

1.26%

1.35%



{A} Considered to be an Alternative Performance Measure.

 

 

DIVIDENDS

 


Rate

Ex-dividend date

Record date

Payment date

Proposed final dividend 2019

11.00p

30 May 2019

31 May 2019

28 June 2019

Interim dividend 2019

7.00p

25 October 2018

26 October 2018

23 November 2018






Total 2019

18.00p




Final dividend 2018

11.10p

31 May 2018

1 June 2018

26 June 2018






Total 2018

11.10p




 

 

TEN YEAR FINANCIAL RECORD

 

Year to 28 February

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Total revenue (£'000)

1,766

2,652

2,961

2,934

3,715

3,546

3,573

3,894

3,945

4,165


_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

Per share (p)











Net revenue return

5.15

8.28

8.87

7.39

8.73

8.20

8.89

10.31

11.12

18.50

Net dividends paid/proposed

5.10

8.00

8.00

7.00

8.00

8.20

8.50

10.30

11.10

18.00

Net asset value

222.99

306.57

387.73

569.58

418.64

542.49

483.03

600.22

694.80

641.45

Ordinary share price

171.50

241.25

311.25

537.50

353.75

458.25

408.00

510.00

592.00

552.00


_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

Equity shareholders' funds (£'000)

39,835

56,530

72,106

120,873

87,175

112,640

95,932

111,212

117,168

106,371


_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

 

 

INVESTMENT PORTFOLIO - TEN LARGEST INVESTMENTS

As at 28 February 2019

 



Valuation

Total

Valuation



2019{A}

assets{B}

2018{A}

Company

Sector (Thai SET)

£'000

%

£'000

Aeon Thana Sinsap





Consumer financial services provider offering hire purchase and personal loans.

Finance & Securities

5,110

4.6

5,791

Central Pattana





Thailand's largest developer of shopping malls, with related businesses in offices and more recently residential property development. It is a unit of conglomerate Central Group.

Property Development

4,767

4.3

5,589

Advanced Info Service





Thailand's largest and leading provider of wireless communication services with over 50% revenue market share and 44 million subscribers.

Information & Communication Technology

4,727

4.2

6,645

Thai Stanley Electric {C}





A Thai-Japanese joint venture that manufactures automotive lighting equipment. It has a well-established domestic presence as well as a growing regional business.

Automotive

4,491

4.0

4,355

Home Product Center





Retailer of building materials and home improvement products.

Commerce

4,477

4.0

5,844

PTT Public Company





Thailand's national energy company, with interests in upstream operations via PTT Exploration and Production (PTTEP), gas transmission pipelines, refineries, petrochemicals, power generation and downstream oil trading and marketing.

Energy & Utilities

4,404

3.9

-

Bangkok Insurance





One of the country's largest non-life insurance companies, affiliated with Bangkok Bank.

Insurance

4,394

3.9

6,000

Siam Cement





Thailand's largest industrial conglomerate with operations in petrochemicals, cement, paper and building materials with operations in Bangladesh, Cambodia, Sri Lanka and Vietnam as well as in Thailand

Construction Materials

4,387

3.9

6,071

Land & Houses{C}





A leading property developer operating in the real estate business for residential property projects, as well as in the rental and services business for rental of shopping malls, hotels and apartments.

Property Development

3,874

3.5

3,591

Kasikornbank





Fourth largest commercial bank in terms of assets, founded by the Lamsam family. Formerly known as Thai Farmers Bank.

Banking

3,873

3.4

5,890

Top ten investments


44,504

39.7



{A}       Purchases and/or sales effected during the year will result in 2018 and 2019 values not being directly comparable.

{B}      Defined as total assets per the balance sheet less current liabilities (before deducting prior charges).

{C}      Holding includes investment in both common stock and non-voting depositary receipts.

 

 



INVESTMENT PORTFOLIO - OTHER INVESTMENTS

As at 28 February 2019

 



Valuation

Total

Valuation



2019{A}

assets{B}

2018{A}

Company

Sector

£'000

%

£'000

PTT Exploration & Production

Energy & Utilities

3,383

3.0

5,350

Minor International

Food & Beverage

3,352

3.0

3,320

Siam City Cement

Construction Materials

3,283

2.9

3,314

Bangkok Bank

Banking

3,242

2.9

3,377

Tesco Lotus Retail Growth Freehold & Leasehold Property Fund (Local market shares)

Property Fund & REITS

2,994

2.7

2,279

Hana Microelectronics

Electronic Components

2,966

2.7

3,310

Tisco Financial Group

Banking

2,928

2.6

3,003

Eastern Water Resources Development & Management

Energy & Utilities

2,915

2.6

3,331

Mega Lifesciences

Commerce

2,844

2.6

617

Kiatnakin Bank

Banking

2,829

2.5

2,528

Top twenty investments


75,240

67.2


Toa Paint

Construction Materials

2,786

2.5

2,532

Osotspa

Food & Beverage

2,728

2.4

-

Banpu

Energy & Utilities

2,625

2.3

4,253

Bangkok Dusit Medical Services

Health Care Services

2,545

2.3

2,718

Electricity Generating

Energy & Utilities

2,300

2.1

3,791

Dynasty Ceramic {C}

Construction Materials

2,282

2.0

2,649

Bumrungrad Hospital

Health Care Services

2,146

1.9

2,287

Siam Commercial Bank

Banking

2,022

1.8

5,062

LPN Development

Property Development

2,015

1.8

1,853

Banpu Power

Energy & Utilities

1,666

1.5

1,823

Top thirty investments


98,355

87.8


Interhides

Automotive

1,606

1.4

51

Krungthai Car Rent & Lease

Finance & Securities

1,512

1.4

118

Alucon

Packaging

1,397

1.3

1,887

Muang Thai Insurance

Insurance

1,337

1.2

1,609

Thaire Life Assurance

Insurance

1,298

1.2

1,679

Goodyear (Thailand)

Automotive

1,257

1.1

1,517

Haad Thip

Food & Beverage

1,023

0.9

1,507

Sammakorn

Property Development

931

0.8

1,440

Thai Reinsurance

Insurance

593

0.5

1,744

Total investments


109,309

97.6


Net current assets{D}


2,712

2.4


Total assets{B}


112,021

100.0



{A}      Purchases and/or sales during the year will result in 2018 and 2019 values not being directly comparable.

{B}      Defined as total assets per the balance sheet less current liabilities (before deducting prior charges).

{C}      Holding includes investment in both common stock and warrants.

{D}      Excludes bank loans of £5,650,000.

Note: Unless otherwise stated, foreign stock is held.

 

 

DIRECTORS' REPORT

The Directors present their Report and the audited financial statements of the Company for the year ended 28 February 2019, taking account of any events between the year end and the date of approval of this Report.

 

Results and Dividend

The Directors declared an initial interim dividend per share of 7.0p, payable on 23 November 2018 to shareholders on the register as at 26 October 2018, with an ex-dividend date of 25 October 2018.

 

The Directors are recommending that a final dividend per share of 11.0p (2018 - 11.1p per share) is paid on 28 June 2019 to shareholders on the register on 31 May 2019. The ex-dividend date is 30 May 2019. A resolution in respect of the final dividend will be proposed at the forthcoming AGM.

 

Investment Trust Status

The Company is registered as a public limited company in England & Wales under registration number 02448580 and has been accepted by HM Revenue & Customs as an investment trust for accounting periods beginning on or after 1 March 2012, subject to the Company continuing to meet the eligibility conditions of s1158 of the Corporation Tax Act 2010 (as amended) and S.I. 2011/2099. In the opinion of the Directors, the Company's affairs have been conducted in a manner to satisfy these conditions and enable it to continue to qualify as an investment trust for the year ended 28 February 2019.

 

Individual Savings Account

The Company intends to manage its affairs so that its shares will be qualifying investments for the stocks and shares component of an Individual Savings Account.

 

Capital Structure, Buybacks and Voting Rights

During the year ended 28 February 2019 the Company bought back and cancelled 280,612 Ordinary shares (2018 - 1,665,119 Ordinary shares). As at 28 February 2019, the Company's issued share capital consisted of 16,582,901 Ordinary shares (2018 - 16,863,513 Ordinary shares) with each share holding one voting right in the event of a poll. An additional 27,971 Ordinary shares were bought back between 1 March 2019 and the date of approval of this Annual Report resulting in 16,554,930 Ordinary shares in issue, with voting rights.

 

Ordinary shareholders are entitled to vote on all resolutions which are proposed at general meetings of the Company. The Ordinary shares carry a right to receive dividends. On a winding up, after meeting the liabilities of the Company, the surplus assets will be paid to Ordinary shareholders in proportion to their shareholdings. There are no restrictions on the transfer of Ordinary shares in the Company other than certain restrictions which may from time to time be imposed by law and regulation.

 

Manager and Company Secretary

The Company has appointed Aberdeen Standard Fund Managers Limited ("ASFML"), part of the Standard Life Aberdeen Group, as its alternative investment fund manager. ASFML has been appointed to provide the Company with investment management, risk management, administration and company secretarial services as well as promotional activities.  The Company's portfolio is managed by Aberdeen Standard Investments (Asia) Limited ("ASIAL"), by way of a group delegation agreement in place between ASFML and ASIAL. 

 

With effect from 1 March 2018, the management fee has been charged to the Company on the following basis: a monthly fee, payable in arrears, calculated at an annual rate of 0.9% (2018: 1.0%) of total assets less current liabilities, with a rebate to the Company for any fees received in respect of any investments by the Company in investment vehicles managed by Aberdeen Standard Investments (see note 4 to the financial statements).

 

The fees payable to Aberdeen Standard Investments during the year ended 28 February 2019 are disclosed in Notes 4 and 5 to the financial statements. The investment management fees and bank loan interest costs were charged 25% to revenue and 75% to capital during the year ended 28 February 2019 (2018 - 100% to revenue).

 

The management agreement is terminable by either party on not less than 12 months' notice. In the event of termination on less than the agreed notice period, compensation is payable in lieu of the unexpired notice period. There are no performance fee arrangements.

 

The terms and conditions of the Manager's appointment, including an evaluation of performance and fees, are reviewed by the Board on an annual basis. The Board also undertakes a review of the management fees in comparison with other funds and believes that the Company's current level of management fees, as reduced with effect from 1 March 2018, remains competitive.  Accordingly, the Board believes that the continuing appointment of the Investment Manager (through the Manager) on the terms agreed is in the interests of shareholders as a whole.

 

In addition, ASFML has sub-delegated promotional activities to Aberdeen Asset Managers Limited ("AAM") and administrative and secretarial services to Aberdeen Asset Management PLC (the "Company Secretaries").

 

Corporate Governance

The Company is committed to high standards of corporate governance. The Board is accountable to the Company's shareholders for good governance and, as required by the Listing Rules of the UK Listing Authority, this statement describes how the Company applies the principles identified in the UK Corporate Governance Code published in April 2016 (the "UK Code") for the year ended 28 February 2019. The UK Code is available on the Financial Reporting Council's ("the FRC") website: frc.org.uk.

 

The Board has also considered the principles and recommendations of the AIC Code of Corporate Governance as published in July 2016 ("the AIC Code") by reference to the AIC Corporate Governance Guide for investment Companies ("the AIC Guide"). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to investment trusts. The AIC Code and AIC Guide are available on the AIC's website: theaic.co.uk

 

The Board considers that reporting against the principles and recommendations of the AIC Code, and by reference to the AIC Guide (which incorporates the UK Code), will provide better information to shareholders.

 

The Board confirms that, during the year, the Company complied with the recommendations of the AIC Code and the relevant provisions of the UK Code, except as set out below.

 

The UK Code includes provisions relating to:

-     the role of the chief executive (A.1.2);

-     executive directors' remuneration (D.1.1 and D.1.2); and

-     the need for an internal audit function (C.3.6).

 

For the reasons set out in the AIC Guide and UK Code, the Board considers that these provisions are not relevant to the position of the Company, being an externally managed investment company. In particular, all of the Company's day-to-day management and administrative functions are outsourced to third parties. As a result, the Company has no executive directors, employees or internal operations. The Company has therefore not reported further in respect of these provisions. The full text of the Company's Statement of Corporate Governance can be found on its website: newthai-trust.co.uk

 

Directors

The current Board consists of a non-executive Chairman and four non-executive Directors, all of whom held office throughout the year under review with the exception of Sarah McCarthy who was appointed a Director on 1 March 2019. The Senior Independent Director is Clare Dobie.

 

The names and biographies of each of the Directors are shown on in the published Annual Report and indicate their range of experience as well as length of service. Each Director has the requisite high level and range of business and financial experience which enables the Board to provide clear and effective leadership and proper stewardship of the Company.

 

The Directors attended Board and formal Committee meetings during the year ended 28 February 2019 as follows (with their eligibility to attend the relevant meeting in brackets):

 

Director

Board Meetings

Audit and Management Engagement Committee Meetings

Nomination Committee Meetings

Nicholas Smith

4 (4)

3 (3)

3 (3)

Clare Dobie

4 (4)

3 (3)

3 (3)

Andy Pomfret

4 (4)

3 (3)

3 (3)

Sarah MacAulay

4 (4)

3 (3)

3 (3)

 

There were an additional three meetings of a Committee of the Board. One of the Board meetings held during the year included a focus on strategic matters including review of the relevance to investors of the Company's investment objective and policy, consideration of feedback from retail and institutional shareholders, an assessment of the future prospects for the Company and a review of the Company's longer term performance and the associated terms of the management agreement with ASFML.

 

All of the Directors will retire at the AGM in accordance with corporate governance best practice. Nicholas Smith, Andy Pomfret and Sarah MacAulay, being eligible, offer themselves for individual re-election as Directors of the Company. Sarah McCarthy, being eligible, offers herself for election as a Director of the Company. Clare Dobie has decided not to seek re-election as a Director and will retire at the conclusion of the AGM. Clare will be succeeded as Senior Independent Director by Andy Pomfret. The Board as a whole believes that each Director standing for re-election or election remains independent of the Manager and free of any relationship which could materially interfere with the exercise of his or her independent judgement on issues of strategy, performance, resources and standards of conduct and confirms that, following formal performance evaluations, each Director's individual performance continues to be effective and demonstrates commitment to the role. The Board therefore has no hesitation in recommending at the AGM the re-election as Directors of Nicholas Smith, Andy Pomfret and Sarah MacAulay and the election as a Director of Sarah McCarthy.

 

Directors' Insurances and Indemnities

The Company maintains insurance in respect of Directors' and Officers' liabilities in relation to their acts on behalf of the Company. Furthermore, each Director of the Company is entitled to be indemnified out of the assets of the Company to the extent permitted by law against all costs, charges, losses, expenses and liabilities incurred by them in the actual or purported execution and/or discharge of their duties and/or the exercise or purported exercise of their powers and/or otherwise in relation to or in connection with their duties, powers or office. These rights are included in the Articles of Association of the Company and the Company has granted indemnities to each Director on this basis.

 

Substantial Interests

As at 28 February 2019 the following were registered, or had notified the Company, as being interested in 3% or more of the Company's Ordinary share capital:

 

Shareholder

Number of shares held

% held

City of London

4,219,239

25.4

Funds managed by Aberdeen Standard Investments

3,017,985

18.2

Lazard Asset Management

2,800,393

16.9

Aberdeen Investment Trust ISA and Share Plans (non-discretionary)

1,775,579

10.7

Hargreaves Lansdown (non-discretionary)

586,687

3.5

 

The above share interests were unchanged as at the date of approval of this Report other than notifications to the Company by Standard Life Aberdeen Group on 3 April 2019 of a holding of 2,913,985 shares, equivalent to 17.7% of the Company's issued share capital at that date, and by City of London on 4 April 2019 of a holding of 4,313,024 shares, equivalent to 26.1% of the Company's issued share capital at that date.

 

Management of Conflicts of Interest and Anti-Bribery Policy

The Board has a procedure in place to deal with a situation where a Director has a conflict of interest. As part of this process, the Directors prepare a list of other positions held and all other conflict situations that may need to be authorised either in relation to the Director concerned or his/her connected persons. The Board considers each Director's situation and decides whether to approve any conflict, taking into consideration what is in the best interests of the Company and whether the Director's ability to act in accordance with his/her wider duties is affected. Each Director is required to notify the Company Secretaries of any potential, or actual, conflict situations which will need authorising by the Board. Authorisations given by the Board are reviewed at each Board meeting.

 

No Director has a service contract with the Company although Directors are issued with letters of appointment upon taking up office. There were no contracts with the Company during, or at the end of the year, in which any Director was interested.

 

The Board takes a zero tolerance approach to bribery and has adopted appropriate procedures designed to prevent bribery. Aberdeen Standard Investments also takes a zero tolerance approach and has its own detailed policy and procedures in place to prevent bribery and corruption.

 

In relation to the corporate offence of failing to prevent tax evasion, it is the Company's policy to conduct all business in an honest and ethical manner. The Company takes a zero-tolerance approach to facilitation of tax evasion whether under UK law or under the law of any foreign country and is committed to acting professionally, fairly and with integrity in all its business dealings and relationships. 

 

Board Committees

The Directors have appointed a number of Committees as set out below. Copies of their terms of reference, which define the responsibilities and duties of each Committee, are available on the Company's website and from the Company Secretaries, on request.

 

Audit and Management Engagement Committee

The Audit and Management Engagement Committee's Report may be found in the published Annual Report.

 

Nomination Committee

All appointments to the Board of Directors are considered by the Nomination Committee which comprises the whole Board and was chaired during the year by Nicholas Smith.

 

The Committee's overriding priority in appointing new Directors to the Board is to identify the candidate with the optimal range of skills and experience to complement the existing Directors. The Board also recognises the benefits, and is supportive, of the principle of diversity in its recruitment of new Directors.

 

As the Company has no employees and the Board is comprised wholly of non-executive Directors and, given the size and nature of the Company, the Board has not established a separate Remuneration Committee. Directors' remuneration is determined by the Nomination Committee.

 

Accountability and Audit

The responsibilities of the Directors and the Auditor, in connection with the financial statements, may be found in the published Annual Report.

 

The Directors who held office at the date of this Report each confirm that, so far as he or she is aware, there is no relevant audit information of which the Company's Auditor is unaware, and that he or she has taken all the steps that he or she could reasonably be expected to have taken as a Director in order to make him or her aware of any relevant audit information and to establish that the Company's Auditor is aware of that information. Additionally there have been no important events since the year end which warrant disclosure. This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2016.

 

The Directors have reviewed the level of non-audit services provided by the Auditor during the year, together with the Auditor's procedures in connection with the provision of such services, and remain satisfied that the Auditor's objectivity and independence is being safeguarded.

 

Going Concern

The Directors have undertaken a rigorous review and consider both that there are no material uncertainties and that the adoption of the going concern basis of accounting is appropriate. The Company's investments consist entirely of equity shares in companies listed on the Stock Exchange of Thailand which are, in most circumstances, realisable within a short timescale.

 

The Board has set limits for borrowing and regularly reviews the level of any gearing, cash flow projections and compliance with banking covenants.

 

In October 2018, the Company entered into a £15m three-year multi-currency revolving loan facility ("the Facility") with Industrial and Commercial Bank of China Limited, London Branch of which £5.65m was drawn down under the Facility at 28 February 2019.

In advance of expiry of the Facility in October 2021, the Company will enter into negotiations with its bankers. If acceptable terms are available from the existing bankers, or any alternative, the Company would expect to continue to access the Facility. However, should these terms not be forthcoming, any outstanding borrowing will be repaid through the proceeds of equity sales.

After making enquiries, including a review of forecasts detailing revenue and liabilities, the Directors have a reasonable expectation that the Company possesses adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis of accounting in preparing the financial statements.

 

The Directors are mindful of the principal risks and uncertainties disclosed in the published Annual Report and in note 15 to the financial statements. After making enquiries, including a review of forecasts detailing revenue and liabilities, the Directors have a reasonable expectation that the Company possesses adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis of accounting in preparing the financial statements.

 

Continuance of the Company

The Company does not have a fixed life. However, under Article 156 of the Articles of Association, if, in the 12 weeks preceding the Company's financial year-end (28 February), the Ordinary shares have been trading, on average, at a discount in excess of 15% to the underlying NAV per share over the same period, notice will be given of a special resolution to be proposed to wind up the Company. In the 12 weeks ended 28 February 2019, the Ordinary shares traded at an average discount of 13.6% to the underlying NAV per share (including income), therefore no such resolution will be put to the Company's shareholders at the forthcoming AGM. In October 2016 the Directors announced that the relevant NAV for these purposes would be calculated including undistributed net revenue for the period.

 

Independent Auditor

As explained in the Audit and Management Engagement Committee's Report, the Directors will propose resolutions at the AGM to re-appoint Deloitte LLP as auditor for the year to 28 February 2020 and to authorise the Directors to determine Deloitte LLP's remuneration.

 

Disclosures in Strategic Report

The Company has chosen, in accordance with section 414C(11) of the Companies Act 2016 to include in the Strategic Report, likely future developments in the Company's business as well as information relating to the Company's greenhouse gas emissions, and in the Strategic Report and in note 15 to the financial statements, information concerning the Company's use of financial instruments.

 

The UK Stewardship Code and Proxy Voting

Responsibility for actively monitoring the activities of portfolio companies has been delegated by the Board to the Manager which has sub-delegated that authority to the Investment Manager. The Directors note the corporate stewardship and sustainability programme of Aberdeen Standard Investments, which can be found at - standardlifeaberdeen.com/corporate-stewardship-and-sustainability

 

Relations with Shareholders

The Directors place great importance on communication with shareholders. The Annual Report is widely distributed to other parties who have an interest in the Company's performance. Shareholders and investors may obtain up-to-date information on the Company through its website, newthai-trust.co.uk, or via Aberdeen Standard Investments Customer Services Department. The Company responds to shareholder correspondence.

 

The Board's policy is to communicate directly with shareholders and their representative bodies without the involvement of Aberdeen Standard Investments in situations where direct communication is required and representatives from the Board offer to meet with major shareholders on an annual basis in order to gauge their views.

 

In addition, members of the Board accompany the Manager when undertaking a series of meetings with institutional shareholders.

 

The Company Secretary only acts on behalf of the Board, not the Manager, and there is no filtering of communication. At each Board meeting the Board receives full details of any communication from shareholders to which the Chairman responds, as appropriate, on behalf of the Board.

 

The Notice of AGM included within the Annual Report is normally sent out at least 20 working days in advance of the meeting. All shareholders have the opportunity to put questions to the Board and Investment Manager at the Company's AGM.

 

Special Business at the AGM

The AGM will be held on 25 June 2019 and the AGM Notice and related notes may be found in the published Annual Report. Resolutions relating to the following items of special business will be proposed at the forthcoming AGM:-

 

Authority to Allot Relevant Securities

Ordinary Resolution No. 10 in the Notice of AGM will renew the authority to allot the unissued share capital up to 10% of the Company's issued share capital as at the date of the passing of the resolution (equivalent to approximately 1.6m Ordinary shares). Such authority will expire on the date of the AGM in 2020 or on 27 August 2020, whichever is earlier. This means that the authority will have to be renewed at the AGM in 2020.

 

Limited Disapplication of Pre-emption Provisions

Resolution 11, which is a Special Resolution, will, if passed, renew the Directors' existing authority to make limited allotments of shares for cash other than according to the statutory pre-emption rights which require all shares issued for cash to be offered first to all existing shareholders provided such allotments are made at a price per Ordinary share above the prevailing NAV per Ordinary share. This authority includes shares that the Company sells or transfers out of Treasury which have been previously bought back into Treasury (if any) pursuant to the authority conferred by Resolution 12 below. The Board will only consider buying in Ordinary shares for cancellation, or for holding in Treasury, at a price which represents a discount to their prevailing NAV. In line with the authority sought under Resolution 10, Resolution 11 will, if passed, give the Directors power to allot, for cash, securities up to 10% of the total issued share capital at the date of the passing of the resolution (equivalent to approximately 1.6m Ordinary shares) other than according to the statutory pre-emption rights.

 

Such authority, which will expire on the date of the earlier of the AGM in 2020 or 27 August 2020, will give the Board flexibility to take advantage of any opportunities to issue new Ordinary shares within a shorter period than would otherwise be the case.

 

Directors' Authority to Purchase the Company's Ordinary Shares

Resolution 12, a Special Resolution, will be proposed to renew the Directors' authority to make market purchases of the Company's Ordinary shares, in accordance with the provisions contained in the Companies Act and the Listing Rules of the UK Listing Authority.

 

Accordingly, the Company is seeking authority, under Resolution 12, to purchase up to a maximum of approximately 2.5m Ordinary shares, or if less, that number of Ordinary shares equivalent to 14.99% of the issued Ordinary share capital at the date of the passing of the Resolution at a minimum price of not less than 25p per Ordinary share (being the nominal value) and a maximum price of not more than the higher of (i) an amount equal to 5% above the average of the middle market quotation for an Ordinary share taken from the London Stock Exchange Daily Official List for the five business days immediately preceding the day on which the Ordinary share is purchased; and (ii) the higher of the price of the last independent trade and the current highest independent bid on the stock market where the purchase is carried out.

 

If passed, Resolution 12 will permit the Company to purchase Ordinary shares under the guidelines described above. Any Ordinary shares purchased in this way will either be cancelled, and the number of Ordinary shares in issue reduced accordingly or, under the power granted by Resolution 12, may be held in Treasury. The authority sought under Resolution 12 will expire on the earlier of date of the AGM in 2020 and 27 August 2020, whichever is earlier, unless renewed prior to such time.

 

Recommendation

The Board considers each of Resolutions 10, 11 and 12 under Special Business at the AGM to be in the best interests of the Company and its members as a whole and is likely to promote the success of the Company for the benefit of its members as a whole. Accordingly, the Board unanimously recommends that shareholders should vote in favour of the resolutions to be proposed under Special Business at the AGM, as they intend to do in respect of their own shareholdings, amounting to 16,264 Ordinary shares.

 

On behalf of the Board

 

Nicholas Smith

Chairman

 

26 April 2019

 

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and the financial statements, in accordance with applicable law and regulations. 

 

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with UK Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.

 

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the company for that period.  In preparing these financial statements, the Directors are required to:

 

-     select suitable accounting policies and then apply them consistently; 

-     make judgements and estimates that are reasonable and prudent;

-     state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and 

-     prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.  

 

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. 

 

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Statement of Corporate Governance that comply with that law and those regulations.

 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website but not for the content of any information included on the website that has been prepared or issued by third parties. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

Responsibility Statement of the Directors in respect of the Annual Financial Report

We confirm to the best of our knowledge, that:

 

-     the financial statements have been prepared in accordance with applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

-     the Strategic Report and Directors' Report include a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that the Company faces.

 

We consider that the Annual Report and financial statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

 

On behalf of the Board

 

Nicholas Smith

Chairman

 

26 April 2019

 

 

STATEMENT OF COMPREHENSIVE INCOME

 



Year ended 28 February 2019

Year ended 28 February 2018



Revenue

Capital

Total

Revenue

Capital

Total


Notes

£'000

£'000

£'000

£'000

£'000

£'000

(Losses)/gains on investments

10

-

(8,393)

(8,393)

-

15,033

15,033

Income

3

4,165

-

4,165

3,945

-

3,945

Management fee

4

(246)

(736)

(982)

(1,132)

-

(1,132)

Administrative expenses

5

(420)

-

(420)

(400)

-

(400)

Currency losses


-

(33)

(33)

-

(89)

(89)



______

______

_____

______

______

______

Net return/(loss) before finance costs and taxation


3,499

(9,162)

(5,663)

2,413

14,944

17,357









Finance costs

6

(36)

(108)

(144)

(59)

-

(59)



______

______

_____

______

______

______

Return/(loss) before taxation


3,463

(9,270)

(5,807)

2,354

14,944

17,298









Taxation

7

(381)

(4)

(385)

(367)

-

(367)



______

______

_____

______

______

______

Return/(loss) after taxation


3,082

(9,274)

(6,192)

1,987

14,944

16,931



______

______

_____

______

______

______









Return/(loss) per Ordinary share (pence)

9

18.50

(55.67)

(37.17)

11.12

83.64

94.76



______

______

_____

______

______

______









The total column of this statement headed "Total" represents the profit and loss account of the Company.

All revenue and capital items in the above statement are derived from continuing operations.

The accompanying notes are an integral part of the financial statements.

 

 



STATEMENT OF FINANCIAL POSITION

 



As at

As at



28 February 2019

28 February 2018


Notes

£'000

£'000

Non-current assets




Investments at fair value through profit or loss

10

109,309

120,643



___________

___________

Current assets




Debtors and prepayments

11

2,486

605

Money market funds


631

3,376

Cash at bank and in hand


486

488



___________

___________



3,603

4,469



___________

___________

Creditors: amounts falling due within one year




Bank loans

12

(5,650)

(5,650)

Other creditors

12

(891)

(2,294)



___________

___________



(6,541)

(7,944)



___________

___________

Net current liabilities


(2,938)

(3,475)



___________

___________

Net assets


106,371

117,168



___________

___________

Share capital and reserves




Called-up share capital

13

4,146

4,216

Share premium account


19,391

19,391

Capital redemption reserve


1,389

1,319

Capital reserve


77,245

88,105

Revenue reserve


4,200

4,137



___________

___________

Equity shareholders' funds


106,371

117,168



___________

___________





Net asset value per Ordinary share (pence)

14

641.45

694.80



___________

___________

 

 



STATEMENT OF CHANGES IN EQUITY

 

Year ended 28 February 2019









Share

Capital





Share

premium

redemption

Capital

Revenue



capital

account

reserve

reserve

reserve

Total


£'000

£'000

£'000

£'000

£'000

£'000

Balance at 28 February 2018

4,216

19,391

1,319

88,105

4,137

117,168

Purchase of own shares for cancellation

(70)

-

70

(1,586)

-

(1,586)

(Loss)/return after taxation

-

-

-

(9,274)

3,082

(6,192)

Dividend paid (see note 8)

-

-

-

-

(3,019)

(3,019)


_____

_______

______

______

______

_____

Balance at 28 February 2019

4,146

19,391

1,389

77,245

4,200

106,371


_____

_______

______

______

______

_____








Year ended 28 February 2018









Share

Capital





Share

premium

redemption

Capital

Revenue



capital

account

reserve

reserve

reserve

Total


£'000

£'000

£'000

£'000

£'000

£'000

Balance at 28 February 2017

4,632

19,391

903

82,260

4,026

111,212

Purchase of own shares for cancellation

(416)

-

416

(9,099)

-

(9,099)

Return after taxation

-

-

-

14,944

1,987

16,931

Dividend paid (see note 8)

-

-

-

-

(1,876)

(1,876)


_____

_______

______

______

______

_____

Balance at 28 February 2018

4,216

19,391

1,319

88,105

4,137

117,168


_____

_______

______

______

______

_____








The revenue reserve represents the amount of the Company's reserves distributable by way of dividend.

The accompanying notes are an integral part of the financial statements.

 

 



STATEMENT OF CASHFLOWS

 



Year ended

Year ended



28 February 2019

28 February 2018


Notes

£'000

£'000

Operating activities




Net (loss)/return before finance costs and taxation


(5,663)

17,357

Adjustment for:




Losses/(gains) on investments


8,393

(15,033)

(Increase)/decrease in accrued dividend income


(115)

15

Decrease in other debtors excluding tax


5

1

(Decrease)/increase in other creditors


(13)

7

Stock dividends included in investment income


-

(50)

Overseas withholding tax


(373)

(368)



_______

_______

Net cash flow from operating activities


2,234

1,929





Investing activities




Purchases of investments


(21,097)

(7,781)

Sales of investments


20,862

17,008



_______

_______

Net cash from investing activities


(235)

9,227





Financing activities




Interest paid


(141)

(58)

Equity dividends paid

8

(3,019)

(1,876)

Loan repaid


(5,650)

-

Loan drawn down


5,650

3,000

Buyback of Ordinary shares

13

(1,586)

(9,137)



_______

_______

Net cash used in financing activities


(4,746)

(8,071)



_______

_______

(Decrease)/increase in cash and cash equivalents


(2,747)

3,085



_______

_______

Analysis of changes in cash and cash equivalents




Opening balance


3,864

779

(Decrease)/increase in cash and cash equivalents as above


(2,747)

3,085



_______

_______

Closing balances


1,117

3,864



_______

_______

 

 



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 28 FEBRUARY 2019

 

1.

Principal activity


The Company is a closed-end investment company, registered in England & Wales No 02448580, with its Ordinary shares being listed on the London Stock Exchange.

 

2.

Accounting policies


(a)

Basis of accounting



The financial statements have been prepared in accordance with Financial Reporting Standard 102 and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the "SORP") issued in November 2014 and updated in February 2018 with consequential updates. The financial statements are prepared in Sterling which is the functional currency of the Company and rounded to the nearest £'000. They have also been prepared on a going concern basis and on the assumption that approval as an investment trust will continue to be granted.






The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statement for the reasons outlined in the Directors' Report. Further detail is included in the Statement of Corporate Governance on the Company's website.






Critical accounting judgements and key sources of estimation uncertainty



The preparation of financial statements requires the use of certain significant accounting judgements, estimates and assumptions which requires management to exercise its judgement in the process of applying the accounting policies and are continually evaluated. The Board considers that there are no accounting judgements, estimates and assumptions which would significantly impact the financial statements.





(b)

Investments



Investments have been designated upon initial recognition at fair value through profit or loss. Investments are recognised and de-recognised on the trade date at cost. Subsequent to initial recognition, investments are valued at fair value which for listed investments is deemed to be the bid market price. Gains and losses arising from changes in fair value are included as a capital item in the Statement of Comprehensive Income and are ultimately recognised in the capital reserve.





(c)

Income



Dividends (other than special dividends), including taxes deducted at source, are included in revenue by reference to the date on which the investment is quoted ex-dividend. Special dividends are reviewed on a case-by-case basis and may be credited to capital, if circumstances dictate. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Company's right to receive payment is established. Fixed returns on non-equity shares are recognised on a time apportioned basis so as to reflect the effective yield on these shares. Other returns on non-equity shares are recognised when the right to return is established. The fixed return on a debt security, if material, is recognised on a time apportioned basis so as to reflect the effective yield on each security. Where the Company has elected to receive its dividends in the form of additional shares rather than cash, the amount of the cash dividend is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital reserves. Interest receivable on bank balances is accounted for on an accruals basis.





(d)

Expenses



Expenses and interest payable are accounted for on an accruals basis. Expenses are charged through the revenue column of the Statement of Comprehensive Income except as follows:



-      expenses directly relating to the acquisition or disposal of an investment, in which case, they are added to the cost of the investment or deducted from the sale proceeds. Such transaction costs are disclosed in accordance with the SORP. These expenses are charged to the capital column of the Statement of Comprehensive Income and are separately identified and disclosed in note 10; and



-      with effect from 1 March 2018, the Company charges 75% of investment management fees and finance costs to the capital column of the Statement of Comprehensive Income, in accordance with the Board's expected long term return in the form of capital gains and income respectively from the investment portfolio of the Company. Previously 100% to revenue.





(e)

Taxation



The tax payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the  Statement of Comprehensive Income because it excludes items of income or expenditure that are taxable or deductible in other years and it further excludes items that are never taxable or deductible (see note 7 for a more detailed explanation). The Company has no liability for current tax.






Deferred taxation is provided on all timing differences that have originated, but not reversed, at the Statement of Financial Position date, where transactions or events that result in an obligation to pay more or a right to pay less tax in future have occurred at the Statement of Financial Position date, measured on an undiscounted basis and based on enacted tax rates. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the accounts which are capable of reversal in one or more subsequent periods. Due to the Company's status as an investment trust company, and the intention to continue to meet the conditions required to obtain approval for the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.





(f)

Nature and purpose of reserves



Share premium account



The balance classified as share premium includes the premium above nominal value from the proceeds on issue of any equity share capital comprising ordinary shares of 25p.






Capital redemption reserve



The capital redemption reserve is used to record the amount equivalent to the nominal value of any of the Company's own shares purchased and cancelled in order to maintain the Company's capital.






Capital reserve



Gains and losses on realisation of investments and changes in fair values of investments which are readily convertible to cash, without accepting adverse terms, are transferred to the capital reserve.






Revenue reserve



This reserve reflects all income and costs which are recognised in the revenue column of the Statement of Comprehensive Income. The revenue reserve represents the amount of the Company's reserves distributable by way of dividend.





(g)

Foreign currency



Assets and liabilities in foreign currencies are translated at the rates of exchange ruling on the Statement of Financial Position date. Transactions involving foreign currencies are converted at the rate ruling on the date of the transaction. Gains and losses on the realisation of foreign currencies are recognised in the Statement of Comprehensive Income and are then transferred to the capital reserve.






The Company's investments are made in Thai Baht, however the Board considers the Company's functional currency to be Sterling. In arriving at this conclusion, the Board considered that the shares of the Company are listed on the London Stock Exchange, it is regulated in the United Kingdom, principally having its shareholder base in the United Kingdom and also pays dividends and expenses in Sterling. Consequently, the Board also considers the Company's presentational currency to be Sterling.





(h)

Dividends payable



Dividends are recognised in the financial statements in the period in which they are paid.

 



2019

2018

3.

Income

£'000

£'000


Income from investments




Overseas dividends

4,156

3,891


Stock dividends

-

50



_______

_______



4,156

3,941



_______

_______


Other income




Deposit interest

2

-


Interest from money market funds

7

4



_______

_______



9

4



_______

_______


Total income

4,165

3,945



_______

_______

 



2019

2018



Revenue

Capital

Total

Revenue

Capital

Total

4.

Management fee

£'000

£'000

£'000

£'000

£'000

£'000


Management fee

246

736

982

1,132

-

1,132



_______

_______

_______

_______

_______

_______










For the year ended 28 February 2019 management and secretarial services were provided by Aberdeen Standard Fund Managers Limited ("ASFML").




The management fee is payable monthly in arrears and was based on an annual amount of 0.9% (2018 - 1.0%) of the net asset value of the Company valued monthly. The agreement is terminable on one year's notice. The total of the fees paid and payable during the year to 28 February 2019 was £982,000 (2018 - £1,132,000) and the balance due to ASFML at the year end was £161,000 (2018 - £193,000). There were no commonly managed funds held in the portfolio during the year to 28 February 2019 (2018 - none).




With effect from 1 March 2018, management fees are charged 25% to revenue and 75% to capital (previously 100% to revenue).

 



2019

2018

5.

Administrative expenses

£'000

£'000


Promotional activities

63

66


Directors' fees

96

103


Auditor's fees for:




audit of the Company's annual accounts

23

23


other assurance services

2

3


Custody fees

59

58


Legal & professional fees

74

36


Listing fees

16

15


Directors' and officers' insurance

6

6


Printing and stationery

18

16


Registrar's fees

14

15


Savings scheme expenses

12

10


Other expenses

37

49



_______

_______



420

400



_______

_______






The management agreement with ASFML also provides for the provision of promotional activities. The total fees paid and payable under the management agreement in relation to promotional activities were £63,000 (2018 - £66,000) with a balance of £10,000 (2018 - £11,000) being payable to ASFML at the year end. The Company has an agreement with ASFML for the provision of company secretarial services and administration services; no separate fee is charged to the Company in respect of this agreement.

 



2019

2018



Revenue

Capital

Total

Revenue

Capital

Total

6.

Finance costs

£'000

£'000

£'000

£'000

£'000

£'000


On bank loans

36

108

144

59

-

59



_______

_______

_______

_______

_______

_______










With effect from 1 March 2018, finance costs are charged 25% to revenue and 75% to capital (previously 100% to revenue).

 



2019

2018



Revenue

Capital

Total

Revenue

Capital

Total

7.

Taxation

£'000

£'000

£'000

£'000

£'000

£'000


(a)

Analysis of charge for the year









Overseas withholding tax

381

4

385

367

-

367




_______

_______

_______

_______

_______

_______



Total tax charge

381

4

385

367

-

367




_______

_______

_______

_______

_______

_______











(b)

Factors affecting tax charge for the year



The UK corporation tax rate is 19% (2018 - effective rate of 19.08%).The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The differences are explained below:







2019

2018




Revenue

Capital

Total

Revenue

Capital

Total




£'000

£'000

£'000

£'000

£'000

£'000



Net return before taxation

3,463

(9,270)

(5,807)

2,354

14,944

17,298












Corporation tax at standard rate of 19% (2018 - effective rate of 19.08%)

658

(1,761)

(1,103)

449

2,851

3,300



Losses/(gains) on investments not taxable

-

1,595

1,595

-

(2,868)

(2,868)



Currency losses not taxable

-

6

6

-

17

17



Non-taxable overseas income

(790)

-

(790)

(752)

-

(752)



Expenses not deductible for tax purposes

3

-

3

-

-

-



Overseas withholding tax

381

4

385

367

-

367



Loan relationships not utilised

5

20

25

10

-

10



Excess management expenses not utilised

124

140

264

293

-

293




_______

_______

_______

_______

_______

_______



Total tax charge

381

4

385

367

-

367




_______

_______

_______

_______

_______

_______











(c)

Factors that may affect future tax charges



At the year end, the Company has an unrecognised deferred tax asset of £2,100,000 (2018 - £1,841,000) arising as a result of accumulated unrelieved management expenses and loan relationship deficits of £12,354,000 (2018 - £10,830,000). A deferred tax asset in respect of this has not been recognised and will only be utilised if the Company has profits chargeable to corporation tax in the future.

 



2019

2018

8.

Dividends on equity shares

£'000

£'000


Amounts recognised as distributions to equity holders in the year:




Final dividend 2018 - 11.10p (2017 - 10.30p)

1,857

1,860


Interim dividend 2019 - 7.00p (2018 - nil)

1,162

-



_______

_______



3,019

1,860



_______

_______




The proposed final dividend for 2019 is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.




Set out below are the proposed final dividend, together with the interim dividend in respect of the financial year, which is the basis on which the requirements of Sections 1158-1159 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way of dividend for the year is £3,082,000 (2018 - £1,987,000).







2019

2018



£'000

£'000


Interim dividend 2019 - 7.00p (2018 - nil)

1,162

-


Proposed final dividend 2019 - 11.00p (2018 - 11.10p)

1,821

1,860



_______

_______



2,983

1,860



_______

_______






Subsequent to the year end the Company has purchased for cancellation a further 27,971 Ordinary shares; therefore the amounts reflected above for the cost of the proposed final dividend for 2019 are based on 16,554,930 in issue, being the number of Ordinary shares in issue at the date of approval of this Report.

 



2019

2018

9.

Return per Ordinary share

£'000

p

£'000

p


Revenue return

3,082

18.50

1,987

11.12


Capital return

(9,274)

(55.67)

14,944

83.64



_______

_______

_______

_______


Total return

(6,192)

(37.17)

16,931

94.76



_______

_______

_______

_______


Weighted average number of Ordinary shares in issue


16,657,633


17,867,486




________


________

 



2019

2018

10.

Investments at fair value through profit or loss

£'000

£'000


Opening fair value

120,643

113,164


Opening investment holding gains

(56,038)

(50,551)



_______

_______


Opening book cost

64,605

62,613


Movements in the year:




Purchases at cost

19,704

9,616


Sales - proceeds

(22,645)

(17,170)


Sales - realised gains

9,860

9,546



_______

_______


Closing book cost

71,524

64,605


Closing investment holding gains

37,785

56,038



_______

_______


Closing fair value

109,309

120,643



_______

_______


Investments listed on a recognised stock exchange

109,309

120,643



_______

_______


(Losses)/gains on investments




Realised gains on sales

9,860

9,546


(Decrease)/increase in investment holding gains

(18,253)

5,487



_______

_______


(Losses)/gains on investments

(8,393)

15,033



_______

_______






Transaction costs




During the year expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within (losses)/gains on investments in the Statement of Comprehensive Income. The total costs were as follows:







2019

2018



£'000

£'000


Purchases

44

24


Sales

22

10



_______

_______



66

34



_______

_______






The above transaction costs are calculated in line with the AIC SORP. The transaction costs in the Company's Key Information Document are calculated on a different basis and in line with the PRIIPs regulations.

 



2019

2018

11.

Debtors: amounts falling due within one year

£'000

£'000


Prepayments and accrued income

277

183


Amounts due from brokers

2,196

413


Other debtors

13

9



_______

_______



2,486

605



_______

_______

 

12.

Creditors: amounts falling due within one year 


(a)

Bank loan



In October 2018 the Company entered into a three year £15,000,000 multi-currency revolving credit facility with Industrial and Commercial Bank of China (ICBC). At the year end, £5,650,000 (2018 - £5,650,000) had been drawn down at an all-in rate of 1.58638% (2018 - 1.52338%) which matured on 11 April 2019 (2018 - 23 March 2018). As of the latest date prior to the signing of this Report the £5,650,000 loan has been rolled over to 11 July 2019 at an all-in interest rate of 1.5765%.






The terms of the loan facility with ICBC contain a covenant that the borrowings should not exceed 25% of the adjusted net asset value of the Company, where borrowings are defined as debt and other secured liabilities plus net liabilities under all derivatives determined on a mark to market basis. Adjusted net asset value is defined as total net assets less the aggregate value of all excluded assets, excluded assets being, without double counting, the value of any unquoted investments, all investments issued by a single issuer in excess of 10% of total net assets and the aggregate value of all investments in any single MSCI industry in excess of 30% of total net assets of the Company. The loan facility agreement also contains a covenant that the Net Asset Value will not fall below £40 million. The Company met both these covenants throughout the period for which the loan facility was utilised with ICBC.






For the period from October 2015 to October 2018, the terms of the former loan facility with Scotiabank (Ireland) Limited contained a covenant that the borrowings should not exceed 20% of the adjusted net asset value of the Company, where borrowings were defined as debt and other secured liabilities plus net liabilities under all derivatives determined on a mark to market basis. Adjusted net asset value was defined as total net assets less the aggregate value of all excluded assets, excluded assets being, without double counting, the value of any unquoted investments, all investments issued by a single issuer in excess of 10% of total net assets and the aggregate value of all investments in any single MSCI industry in excess of 30% of total net assets of the Company. The loan facility agreement also contained a covenant that the Net Asset Value would not fall below £28 million. The Company met both these covenants throughout the period for which the loan facility was utilised with Scotiabank (Ireland) Limited.









2019

2018


(b)

Other creditors

£'000

£'000



Amounts due to brokers

626

2,019



Sundry creditors

265

275




_______

_______




891

2,294




_______

_______

 



2019

2018

13.

Called-up share capital

£'000

£'000


Allotted, called up and fully paid:




Opening balance of 16,863,513 (2018 - 18,528,632) Ordinary shares of 25p each

4,216

4,632


Repurchase of 280,612 (2018 - 1,665,119) Ordinary shares of 25p each for cancellation

(70)

(416)



_______

_______


Closing balance of 16,582,901 (2018 - 16,863,513)

4,146

4,216



_______

_______






During the year ended 28 February 2019, the Company bought back and cancelled 280,612 Ordinary shares of 25p each (2018 - 1,665,119) for a total consideration of £1,586,000 (2018 - £9,099,000). This represented 1.7% of the Company's issued Ordinary share capital as at 28 February 2019.




Subsequent to the year end the Company bought back and cancelled a further 27,971 Ordinary shares of 25p each for a total consideration of £154,000.

 

14.

Net asset value per share


The net asset value per share and the net assets attributable to Ordinary shares at the end of the year calculated in accordance with the Articles of Association were as follows:







2019

2018


Net assets attributable (£'000)

106,371

117,168



_______

_______


Number of Ordinary shares in issue

16,582,901

16,863,513



_______

_______


Net asset value per share (p)

641.45

694.80



_______

_______

 

Financial instruments

Risk management


The Company's investment activities expose it to various types of financial risk associated with the financial instruments and markets in which it invests. The Company's financial instruments comprise securities and other investments, cash balances, loans and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income.



The Board has delegated the risk management function to Aberdeen Standard Fund Managers Limited ("ASFML") under the terms of its management agreement with ASFML (further details of which are included under note 4). The Board regularly reviews and agrees policies for managing each of the key financial risks identified with the Manager. The types of risk and the Manager's approach to the management of each type of risk, are summarised below. Such approach has been applied throughout the year and has not changed since the previous accounting period. The numerical disclosures exclude short-term debtors and creditors.



Risk management framework


The directors of ASFML collectively assume responsibility for ASFML's obligations under the AIFMD including reviewing investment performance and monitoring the Company's risk profile during the year.



ASFML is a fully integrated member of the Standard Life Aberdeen Group, which provides a variety of services and support to ASFML in the conduct of its business activities, including in the oversight of the risk management framework for the Company. The AIFM has delegated the day to day administration of the investment policy to Aberdeen Standard Investments Asia Limited, which is responsible for ensuring that the Company is managed within the terms of its investment guidelines and the limits set out in its pre-investment disclosures to investors (details of which can be found on the Company's website). The AIFM has retained responsibility for monitoring and oversight of investment performance, product risk and regulatory and operational risk for the Company.



The Manager conducts its risk oversight function through the operation of the Group's risk management processes and systems which are embedded within the Group's operations. The Group's Risk Division supports management in the identification and mitigation of risks and provides independent monitoring of the business. The Division includes Compliance, Business Risk, Market Risk, Risk Management and Legal. The team is headed up by the Group's Head of Risk, who reports to the CEO of the Group. The Risk Division achieves its objective through embedding the Risk Management Framework throughout the organisation using the Group's operational risk management system ("SHIELD").



The Group's Internal Audit Department is independent of the Risk Division and reports directly to the Group's CEO and to the Audit Committee of the Group's Board of Directors. The Internal Audit Department is responsible for providing an independent assessment of the Group's control environment.



The Group's corporate governance structure is supported by several committees to assist the board of directors of Standard Life Aberdeen, its subsidiaries and the Company to fulfil their roles and responsibilities. The Group's Risk Division is represented on all committees, with the exception of those committees that deal with investment recommendations. The specific goals and guidelines on the functioning of those committees are described on the committees' terms of reference.


Risk management


The main risks the Company faces from its financial instruments are (i) market risk (comprising interest rate risk, currency risk and price risk), (ii) liquidity risk and (iii) credit risk.


Market risk


The fair value of or future cash flows from a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, foreign currency risk and price risk. 



Interest rate risk

Interest rate movements may affect:

-      the level of income receivable on cash deposits;

-      interest payable on the Company's variable rate borrowings.


Management of the risk


The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions.



The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Borrowings comprise variable rate, revolving, and uncommitted facilities. The variable rate facilities are used to finance opportunities at low short-term fixed rates and, the revolving and uncommitted facilities to provide flexibility in the short-term. Current bank covenant guidelines state that the total borrowings will not exceed 25% of the adjusted net assets of the Company as defined in note 12.



Interest risk profile

 


The interest rate risk profile of the Company's financial assets and liabilities, excluding equity holdings which are all non-interest bearing, at the Statement of Financial Position date was as follows:







Weighted






 average





period for

Weighted




which rate

average

Fixed

Floating


is fixed

interest rate

rate

rate

At 28 February 2019

Years

%

£'000

£'000

Assets





Sterling

-

0.47

-

460

Thailand Baht

-

-

-

26






_______






486





_______

Liabilities






Bank loans - Sterling

0.16{A}

1.59

(5,650)

-


_______

_______

_______

_______







 Weighted





  average





period for

 Weighted




which rate

average

Fixed

Floating


is fixed

interest rate

rate

rate

At 28 February 2018

Years

%

£'000

£'000

Assets






Sterling

-

0.22

-

488


_______

_______

_______

_______

Liabilities






Bank loans - Sterling

0.08{B}

1.52

(5,650)

-


_______

_______

_______

_______

{A} Equivalent to two months.





{B} Equivalent to one month.







The weighted average interest rate is based on the current yield of each asset, weighted by its market value. The weighted average interest rate on bank loans is based on the interest rate payable, weighted by the total value of the loans. The maturity date of the Company's loan is shown in note 12.

The floating rate assets consist of cash deposits on call earning interest at prevailing market rates.

The Company's equity portfolio and short-term debtors and creditors (excluding bank loans) have been excluded from the above tables.



Interest rate sensitivity


Movements in interest rates would not have a material direct impact on net assets attributable to the Company's shareholders and total profit due to the relatively low exposure to cash and bank loans.


Foreign currency risk


All of the Company's investment portfolio is invested in overseas securities and the Statement of Financial Position, therefore, can be significantly affected by movements in foreign exchange rates.


Management of the risk


It is not the Company's policy to hedge this risk on a continuing basis but the Company may, from time to time, match specific overseas investment with foreign currency borrowings.



The revenue account is subject to currency fluctuation arising on dividends paid in foreign currencies. The Company does not hedge this currency risk.


Risk exposure by currency of denomination:



28 February 2019

28 February 2018



Net

Total


Net

Total


Overseas

monetary

currency

Overseas

monetary

currency


investments

assets

exposure

investments

assets

exposure


£'000

£'000

£'000

£'000

£'000

£'000

Thailand Baht

109,309

1,596

110,905

120,643

(1,606)

119,037

Sterling

-

(4,534)

(4,534)

-

(1,869)

(1,869)



_______

_______

_______

_______

_______

_______


Total

109,309

(2,938)

106,371

120,643

(3,475)

117,168


_______

_______

_______

_______

_______

_______








Foreign currency sensitivity


There is no sensitivity analysis included as the Company's significant foreign currency financial instruments are in the form of equity investments, which have been included within the price risk sensitivity analysis so as to show the overall level of exposure.


Price risk


Other price risks (ie changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments.


Management of the risk


It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a sector. Both the allocation of assets and the stock selection process act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. The investments held by the Company are all listed on the Stock Exchange of Thailand ("SET").


Price risk sensitivity


If market prices at the Statement of Financial Position date had been 10% higher or lower while all other variables remained constant, the return attributable to Ordinary shareholders for the year ended 28 February 2019 would have increased/(decreased) by £10,931,000 (2018 - increased/(decreased) by £12,064,000) and equity reserves would have increased/(decreased) by the same amount.


Market prices may indirectly be affected by political instability within Thailand from time to time which constitutes political risk.


Liquidity risk

This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.


Management of the risk


Liquidity risk is not considered to be significant as, whilst liquidity is limited in certain stocks the Company holds, the majority of the Company's assets comprise readily realisable securities which can be sold to meet funding requirements if necessary.



Short-term flexibility is achieved through the use of loan facilities, details of which can be found in note 12. Under the terms of the loan facility, the Manager provides the lender with loan covenant reports on a monthly basis, to provide the lender with assurance that the terms of the facility are not being breached. The Manager will also review the credit rating of a lender on a regular basis.



The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Borrowings comprise a revolving multi-currency credit facility. The Board has imposed a maximum gearing level, after netting off cash equivalents, of 15% of net assets. Details of borrowings at 28 February 2019 are shown in note 12.


Liquidity risk exposure


At 28 February 2019 the Company's bank loan, amounting to £5,650,000 (2018 - £5,650,000), was due for repayment or roll-over within two (2018 - one) months.


Credit risk


This is the risk of a counterparty to a transaction failing to discharge its obligations under that transaction which could result in the Company suffering a loss.


Management of the risk


-        investment transactions are carried out with a large number of brokers, whose credit-standing is reviewed periodically by the Investment Manager, and limits are set on the amount that may be due from any one broker;


-        the risk of counterparty exposure due to failed trades causing a loss to the Company is mitigated by the review of failed trade reports on a daily basis. In addition, both stock and cash reconciliations to the Custodian's records are performed on a daily basis to ensure discrepancies are picked up. The Manager's Compliance department carries out periodic reviews of the Depositary's operations and reports its findings to the Manager's Risk Management Committee. This review will also include checks on the maintenance and security of investments held;


-        the risk of counterparty exposure due to stock lending (when conducted) is mitigated by the review of collateral positions provided daily by the various counterparties involved; and


-        where cash is held on deposit, the institutions concerned are reviewed regularly.

 


In summary, compared to the amounts in the Statement of Financial Position, the maximum exposure to credit risk at 28 February was as follows:



2019

2018


Statement of


Statement of



Financial

Maximum

Financial

Maximum


Position

exposure

Position

exposure

Current assets

£'000

£'000

£'000

£'000

Loans and receivables

2,486

2,486

605

605

Money market funds

631

631

3,376

3,376

Cash at bank and in hand

486

486

488

488



_______

_______

_______

_______



3,603

3,603

4,469

4,469



_______

_______

_______

_______


None of the Company's financial assets is past due or impaired.


Fair values of financial assets and financial liabilities


The fair value of the short term loan is shown in note 12 to the financial statements. The book value of cash at bank and bank loan included in these financial statements approximate to fair value because of their short-term maturity. The carrying values of fixed asset investments are stated at their fair values, which have been determined with reference to quoted market prices. For all other short-term debtors and creditors, their book values approximate to fair values because of their short-term maturity.

 

16.

Fair value hierarchy


FRS 102 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following classifications:




Level 1: unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the measurement date.


Level 2: inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly or indirectly.


Level 3: inputs are unobservable (ie for which market data is unavailable) for the asset or liability.




The financial assets and liabilities measured at fair value in the Statement of Financial Position are grouped into the fair value hierarchy at the reporting date as follows:





Level 1

Level 2

Level 3

Total


As at 28 February 2019

£'000

£'000

£'000

£'000


Financial assets at fair value through profit or loss





Quoted equities

108,052

1,257

-

109,309



_______

_______

_______

_______


Net fair value

108,052

1,257

-

109,309



_______

_______

_______

_______









Level 1

Level 2

Level 3

Total


As at 28 February 2018

£'000

£'000

£'000

£'000


Financial assets at fair value through profit or loss





Quoted equities

119,126

1,517

-

120,643



_______

_______

_______

_______


Net fair value

119,126

1,517

-

120,643



_______

_______

_______

_______








Quoted equities






The fair value of the Company's investments in quoted equities has been determined by reference to their quoted bid prices at the reporting date. Quoted equities included in Fair Value Level 1 are actively traded on recognised stock exchanges. The Company's holding in Goodyear (Thailand) of £1,257,000 (2018: £1,517,000) is classified as Level 2 due to the lack of active trading in the stock.

 

17.

Related party transactions


Directors' fees and interests


Fees payable during the year to the Directors and their interest in shares of the Company are disclosed within the Directors' Remuneration Report.




Transactions with the Manager


The Company has agreements with ASFML for the provision of investment management, secretarial, accounting and administration and promotional activity services. Details of transactions during the year and balances outstanding at the year end are disclosed in notes 4 and 5.

 

18.

Capital management policies and procedures


The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance.




The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes: 


-      the planned level of gearing which takes account of the views on the market;


-      the level of equity shares in issue;


-      the extent to which revenue in excess of that which is required to be distributed should be retained.




The Company does not have any externally imposed capital requirements.

 

 

ALTERNATIVE PERFORMANCE MEASURES

Alternative performance measures are numerical measures of the Company's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Company's applicable financial framework includes FRS 102 and the AIC SORP. The Directors assess the Company's performance against a range of criteria which are viewed as particularly relevant for closed-end investment companies.


Total return

Total return is considered to be an alternative performance measure. NAV and share price total returns show how the NAV and share price has performed over a period of time in percentage terms, taking into account both capital returns and dividends paid to shareholders. NAV total return involves investing the same net dividend in the NAV of the Company with debt at fair value on the date on which that dividend was earned. Share price total return involves reinvesting the net dividend in the month that the share price goes ex-dividend.


The tables below provide information relating to the NAVs and share prices of the Company on the dividend reinvestment dates during the years ended 28 February 2019 and 28 February 2018 and total return for the year.






Dividend


Share

2019

rate

NAV

price

28 February 2018

N/A

694.80p

592.00p

31 May 2018

11.10p

659.94p

565.00p

25 October 2018

7.00p

647.50p

549.00p

28 February 2019

N/A

641.45p

552.00p



_______

_______

Total return


-5.1%

-3.7%



_______

_______






Dividend


Share

2018

rate

NAV

price

28 February 2017

N/A

600.22p

510.00p

1 June 2017

10.30p

609.63p

516.25p

28 February 2018

N/A

694.80p

592.00p



_______

_______

Total return


+17.7%

+18.4%



_______

_______





Discount to net asset value per Ordinary share

The discount is the amount by which the share price of 552.00p (2018 - 592.00p) is lower than the net asset value per share of 641.45p (2018 - 694.80p), expressed as a percentage of the net asset value.


Dividend cover

Revenue return per share of 18.5p (2018 - 11.1p) divided by total dividends per share of 18.0p (2018 - 11.1p) expressed as a ratio.


Net gearing

Net gearing measures the total borrowings of £5,650,000 (28 February 2018 - £5,650,000) less cash and cash equivalents of £2,687,000 (28 February 2018 - £2,258,000) divided by shareholders' funds of £106,371,000 (28 February 2018 - £117,168,000), expressed as a percentage. Under AIC reporting guidance cash and cash equivalents includes amounts due and to brokers at the year end as well as cash and money market funds. These balances can be found in notes 11 and 12.


Ongoing charges

Ongoing charges is considered to be an alternative performance measure. The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC as the total of investment management fees and administrative expenses and expressed as a percentage of the average net asset values with debt at fair value throughout the year.





2019

2018

Investment management fees (£'000)

982

1,132

Administrative expenses (£'000)

420

400

Less: non-recurring charges (£'000)

(26)

(1)


_______

_______

Ongoing charges (£'000)

1,376

1,531


_______

_______

Average net assets{A} (£'000)

109,519

113,362


_______

_______

Ongoing charges ratio

1.26%

1.35%


_______

_______


{A}    During both years net asset values with debt at fair value equated to net asset value with debt at amortised cost due to the short-term nature of the bank loans.


The ongoing charges ratio provided in the Company's Key Information Document is calculated in line with the PRIIPs regulations.

 

 

The Annual Financial Report announcement is not the Company's statutory accounts. The above results for the year ended 28 February 2019 are an abridged version of the Company's full statutory accounts which will be filed with the Registrar of Companies in due course.

 

The statutory accounts for the years ended 28 February 2018 and 28 February 2019 received unqualified reports from the Company's independent auditor and did not include any reference to matters to which the independent auditor drew attention by way of emphasis without qualifying the reports, and did not contain a statement under s.498 of the Companies Act 2006. The financial information for the year ended 28 February 2018 is derived from the statutory accounts which have been filed with the Registrar of Companies.

 

The Annual Report, enclosing the Notice of Annual General Meeting, will be posted to shareholders in May 2019 and will also be available from the Company's website: newthai-trust.co.uk. The Company's Annual General Meeting will be held at 11.30am on 25 June 2019 at Bow Bells House, 1 Bread Street, London EC4M 9HH.

 

Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise and may be affected by exchange rate movements.  Investors may not get back the amount they originally invested.

 

END

 


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